UK Landlord Forum / Life

Hi,

Back ground
In January 2014 I sold my residential property of 10 years to purchase a BTL and house.
The BTL property was purchased in January 2014 with a view of giving it a lick of paint, changing the rotten carpet and renting it out (and living with the in-laws between exchanging and completing on a residential house).

Unfortunately, on day one of completion of the BTL property the issues started to surface. 
What seemed like a leaking toilet (which we thought would be relatively easy to fix) uncovered missing  / rotten floorboards , missing joists through the flat , broken pipes, non earthed wiring throughout the property, gas leaks, gas and electric meter serial number mix up (since the property was converted into flats in the 80's), leaking French doors, rotten underlay, sash windows that were painted shut, rotten sash windows, washing machine that shreds clothes, cracks on walls hidden behind wardrobes, rotten skirting board behind built in furniture, non gas compliant hob, non gas compliant fire place....oh the list goes on and to think the previous owner rented out the flat to their friend ! P.S. the building survey only noted cosmetic issues such as carpet replacement etc.

Anyway, due to the number of issues found and the unbudgeted costs associated to making good the property for rental, my partner and I decided to carry out the work ourselves in our evenings and weekends, while living in the property, in order to reduce costs. This resulted in us putting the residential house purchase on temporary hold while we made good the BTL.

After months of hard graft the property was ready for rental. However, between arranging the letting with the estate agent and completing on the residential house, the BTL was not rented out until December 2014. Consequently, as we lived in the property for a period of time (less than a year) what costs can be off-set against the furnished BTL?

•         Conveyancing fees
•         Mortgage arrangement fee (term of the mortgage)
•         Mortgage product fees
•         Mortgage interest  for the period we resided in the property

The following have not been offset
•         Labour for all of the work my partner and I carried out
•         Council tax - for the period we lived in the property
•         Water bills  - for the period we lived in the property
•         Gas - for the period we lived in the property
•         Electric - for the period we lived in the property
•         Communal bills - for the period we lived in the property

Does the < 1 year period class as self-occupation, even though we never had any intention of living in the property and purchased a residential house?

I have spoken to my accountant regarding this as I need the off-set costs for the 2014/2015 self-assessment and I am not 100% convinced with his response. 
Hence, I wanted to reach out and see your thoughts on the matter.

Thank you for your assistance

You need to be fair.

Basically only claim against income those costs which would have been wholly &  necessarily incurred if you had lived elsewhere during the period.

So Mortgage Interest, leaseholder charges.

The rest of the utilities I would say are down to you, unless you want to argue the point.

You may well have a better argument putting these costs down against your capital improvement costs. But not against future rental income.

The same goes with the arrangement fees etc, they go against the capital cost, not the revenue.

I assume that's nearly what your accountant said?

Thank you.

Based on my circumstances, do the costs associated to furnishing a property get set of against rent (all furniture was purchased for rental other than a bed and mattress that I used from my previous property)?

You would think so wouldn't you!

Well the answer is No.

The cost is ignored and you claim 10% of your Rent every year, to cover the cost of the furniture.

This is the gross rent, and if you get Agents fees deducted, you must remember to add back this to give your gross to claim the 10% of this.

Are carpets and curtains furniture? Maybe, yes, no... you choose.

Not very helpful is it?

Personally now I would never furnish a property, carpets and blinds and a boiler make it I suppose Part furnished, but I promise you, it will be more expensive in the long run, and you get worse tenants IMO.

Mainly I hated the detailed Inventories!