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I’ve just finished renovating a large HMO in my LLP company and been told by my accountant the £20k I spent on white goods/furnishings can’t be offset against tax. Is he right?
Look forward to hear anyone’s opinion because £20k is a big mistake if he’s wrong.
Don't know the answer to your query but if this an example of how you manage your business it doesn't auger well for you.
BEFORE you incurred the expenditure wouldn't it have been worthwhile discussing your plans with your accountant!?
It is after all what you pay him for!!
With all the so many different changes that have occurred recently in the PRS it had to be worth confirming your understanding of a subject especially when it involves big money.
This surely must be normal DD for a LL operating a property rental business.
I would have expected the queries you pose to have been asked about BEFORE you commenced works.
I'm sure others more knowledgeable than me may have bern able to give you a steer as to the relevant issues.
That is the whole point of PT.
You can raise queries that might prevent you making very expensive mistakes plus every other LL also learn of your experience which will possibly assist them.
Perhaps you weren't aware of the very useful efficacy of using the collective expertise of the very many knowledgeable PT members.
Let us hope that you are able to offset.
I confess I haven't a clue which is why I would always ask BEFORE i committed to such expenditure.
Hopefully things work out as you believe they should.
But this is a lesson in how NOT to do things.
Get the answers from whoever before you launch into an investment strategy.
I would also ask whether you have factored in the possibility of Individual Council Tax Banding per room.
It is highly likely that your property will be assessed by the VOA.
I hope your property isn't assessed for ICTB.
That would be another expensive mistake such that it might compromise financial viability of your new HMO.
Again did you ever ask the Council whether the VOA would revalue?
Whilst I appreciate you taking time to answer, and you do make some good points, the self important, patronising tone level was a little unnecessary. Ppl come on PT to get real advice. Not cheap shots.
This is my fifth HMO but my first in an LLP because of recent tax changes.
No patronising at at all.
But your query would have been expected BEFORE the fact NOT after.
You say you have done previous HMO.
Well you must have confirmed DD on those before you spent the money.
The query you raise it sounds like you aren't sure.
Well before I spent £20000 I would want to be sure!
It seems like you might be OK but might is not a way to run a business.
You MUST know for certain before you make a business decision like this.
What you did 6 months ago might well have changed now.
This market and regulations are seemingly constantly changing.
I would check everytime you do a new development.
Govt seems to trickle out regulation changes without many being aware of this.
You cannot rely on previous experience.
he is correct as it is a first purchase not a replacement
Director of Tax Peplows Limited
CTA ACA FCCA
Hi Jen, I can see you have been active on here for 5 years and this is not your first HMO so you are not a novice, you can’t claim it now but I think you will be able to claim it against any CGT when you come to eventually sell the property. I would ask your accountant about ALL the changes George Osborne has made to TAX CGT etc and how they affect your new purchases and if he doesn’t know I would change your accountant to one who is a specialist in property. If you were exchanging like for like products because the old ones were broken then you can claim, if you have bought better products ie washer/dryer to upgrade from a washing machine you can’t.
White goods and furnishings could have been leased and then offset annually as a business expense - there are several companies who offer this now. Renovation costs in some cases can be offset as you probably are aware.
Thanks Michael. That is an interesting strategy I’ve heard a few ppl mention. Well worth looking into on a future project.
Unfortunately you wouldn't claim the cost of furnishings as an expense for CGT.
Thanks Debbie good to know for the future, can you claim refurbishment costs like new kitchens/bathrooms when you have refurbished a property stuck in 70’s when you sell? I know I can’t claim whilst I am renting it out now.
Yes you can as long as you are replacing like with like (or the nearest modern equivalent). What do you mean by you cannot claim it whilst renting now?