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UK Tax Queries Background -- we are recently retired and

UK Tax Queries Background --...

UK Tax Queries Background -- we are recently retired and currently living in Malaysia. We have worked overseas for many years and we are non-resident for UK tax purposes. We have property in UK which is let out (we are non-resident landlords) and we have recently started to receive UK Government Pension. These are our only incomes. Questions: 1. We had a rogue letting agent in tax year 2016-17 who allowed unauthorised lettings. These resulted in physical damage to furniture and carpets in our apartment. We cancelled the agent agreement in March 2017 (tax year 2016-17). We purchased replacements for the damaged items in May 2017 (tax year 2017-18). Can the replacement costs be charged against tax year 2016-17 when the damage physically happened and when we cancelled the agent agreement, or do they have to be charged in the tax year 2017-18 when the replacement items were purchased? 2. We incurred un-planned travelling costs to visit the UK from Malaysia to sort out the mess caused by the rogue agent and to bring the apartment up to a lettable state again, including purchasing replacement items. Can these travel costs be claimed as expenses against rental income? 3. During periods between lets when the property is not rented out – even though it was available for rent and being advertised with agents - can expenses such as council tax which are paid by us during the non-rented period be claimed against tax? 4. My wife received her first UK Government pension in tax year 2016-17. This consisted of a lump sum for years 2010 to 2016 and then regular pension payments for 2017. Is the lump sum taxable and does it have to be included in tax year 2016-17 or can it be spread across tax years? Note: the total pension amount is significantly more than the personal allowance due to the lump sum. 5. Regarding the pension lump sum - if it is taxable - my wife did not pay any tax in the previous year 2015-16. Will she be charged at 0% or the basic rate of 20% in tax year 2016-17? Look forward to a reply. Thanks and regards Brian ****

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Answered in 7 hours by:
10/16/2017
Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 13,997
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Hi, Sam here, one of the UK Tax Experts here on Just Answer, Thank you for your question - I shall reply shortly.

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Customer reply replied 1 month ago

Hello Sam, I just received an email asking me to increase the answer price to $100 due to the work required in answering. This is ok - but the link provided does not work. Are you able to help with this? Thanks and regards Brian ****

HI

This is not something I am involve din but I have sent a message to the category moderators to see if they can assist

Thanks

Sam

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Customer reply replied 1 month ago
Hi Sam,Just Answer support says the question price has been increased manually to $100.Are you able to see this and are you now able to answer the queries?
Thanks and regards
Brian Stubbs

HI Brian

Yes and lets get on with your questions

1. We had a rogue letting agent in tax year 2016-17 who allowed unauthorised lettings. These resulted in physical damage to furniture and carpets in our apartment. We cancelled the agent agreement in March 2017 (tax year 2016-17). We purchased replacements for the damaged items in May 2017 (tax year 2017-18). Can the replacement costs be charged against tax year 2016-17 when the damage physically happened and when we cancelled the agent agreement, or do they have to be charged in the tax year 2017-18 when the replacement items were purchased?

The costs for furniture if allowable would be claimed in 2017/2018 when you paid for the replacements and can claim the like for like cost - due to the cessation of the wear and tear claim from 2015/2016 - however replacement carpets although allowable in 2016/2017 are only a valid claim IF you had a tenant in situ at the time - which would seem unlikely as you state that this helped you get the property back into the rent able position you wanted - so these are unlikely to be a valid claim

2. We incurred un-planned travelling costs to visit the UK from Malaysia to sort out the mess caused by the rogue agent and to bring the apartment up to a lettable state again, including purchasing replacement items. Can these travel costs be claimed as expenses against rental income?

Did you come to the UK solely to take care of this matter , focus only on this then return to Malaysia or also visit elsewhere in the UK - where did you stay ? I asked this in case any of your trip formed any personal/leisure reasons - if so then you would need to apportion the costs to come to the UK accordingly.

3. During periods between lets when the property is not rented out – even though it was available for rent and being advertised with agents - can expenses such as council tax which are paid by us during the non-rented period be claimed against tax?

No - you have to be in a position of receiving rent (or due rent with an existing rental agreement ) for those expenses to be allowable, so during a non rent period - these are not allowable costs

4. My wife received her first UK Government pension in tax year 2016-17. This consisted of a lump sum for years 2010 to 2016 and then regular pension payments for 2017. Is the lump sum taxable and does it have to be included in tax year 2016-17 or can it be spread across tax years? Note: the total pension amount is significantly more than the personal allowance due to the lump sum.

I am afraid the tax is due on the year that the lump sum is paid - at that highest rate of tax arising for that year - it cannot be spread across tax years as paid as a lump sum in the one tax year - the only way around this would be to NOT take the lump sum and ask for a monthly increase in the basic state pension payments which would have been an option offered

5. Regarding the pension lump sum - if it is taxable - my wife did not pay any tax in the previous year 2015-16. Will she be charged at 0% or the basic rate of 20% in tax year 2016-17?

Yes - tax will be due if tax arises in 2016/2017 (and your wife is a taxpayer) it will be at the rate that her tax position sits for 2016/2017 which you seem to suggest is 20%

Let me know if I can assist further

Thanks

Sam

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Customer reply replied 1 month ago
Hi Sam - thanks for your answers. Queries 3, 4 and 5 are fully answered - thanks.
Query #1 - Some further clarification details on this one which will give you a better overall picture – the rogue agent claimed to have a signed tenancy agreement for a one year lease with a footballer from Newcastle United. But he never signed or finalised the lease. Instead of telling us, the agent let the property on AirBNB for party and general lets (including stag and hen parties at weekends) without our knowledge or approval. Hundreds of people stayed there instead of a single family. Furniture, mattresses, divan, rugs and soft furnishings were wrecked – vomit and drink stains, dirty marks, torn furniture etc. It took a cleaning agency 2 full days just to clean up the mess. We had to throw away furniture, mattresses, one bed, rugs and all soft furnishings – they were disgusting. We have photos to back up their condition.
The agent maintained the façade of a footballer tenant and even claimed the footballer had requested 2 extensions of the lease, which we agreed to, not knowing the true story. These were all fake agreements. We found out about the unauthorized lettings when my wife saw our apartment being advertised on AirBNB.
So the bot***** *****ne is that we had to change the damaged items and it is these items that we plan to claim. We understand the “like for like” replacement proviso.
You mention carpets in your above reply – sorry for poor choice or words – there are no carpets but there were 2 rugs. One had disappeared altogether and the other was filthy and could not be used. There was also damage to the laminate flooring, caused by stiletto heels, which will need to be replaced in due course.
Given these clarification details – we believe that the “like for like” replacement furniture, rugs, mattresses etc should be claimable. Would you agree?
(Please note that it is very unlikely that we will get any compensation from the rogue agent for the damaged items.)
Customer reply replied 1 month ago
Query #2 - We traveled to UK in May 2017 trip solely to take care of the apartment problem. We stayed at my brother’s house – he lives nearby – our apartment was un-livable. It took us 2 weeks to resolve everything and we then returned directly back to Malaysia. We have numerous invoices for lots of major and minor replacement purchases to back up our activities while we were there.
What would we need to convince HMRC of the objective of the trip and be able to claim the travel costs?Query #6 - NEW - One final query if you don’t mind which I had forgotten to include – we rented a storage locker when we started to let the apartment several years ago. We have not previously claimed the costs because we were below the tax threshold in previous years.
The locker is only needed because we let out the property. It contains items that are not required by the tenants and some minor personal effects.
Is the cost of the locker claimable against rental income?Look forward to your further advice.
Thanks and regards
Brian

Hi Brian

Thanks for your response

Re 1) i can appreciate your position but this is a matter for the courts and not a matter for which the tax office can allow you out of pocket costs to get the property back to a let able condition (i.e furnished) as you could have chosen to go down the unfurnished let route- so I would advsie you seek legal recourse for these additional costs

Unless repairs or maintenance takes place when you have a tenant in situ then it is never allowable I am afraid - but as rungs then you could get like for like replacement as with the furniture mattresses and these rugs

2) I would say you claim 75% of the travel costs as clearly you came to the UK as a trigger to rectify the property position but as you stayed with family - its fair to say there was in turn a duel purpose, so a &% claim of travel costs would be deemed reasonable by HMRC

6)NO - this is a personal expense for you to retain items that you wish to keep so not an allowable cost

I am about to head out for a client visit so will not be back until later, but assure you, should you have any further queries, I will respond on my return (near to 7pm)

Thanks

Sam

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Customer reply replied 1 month ago
Hi Sam - thanks for reply.Just need a little clarification on Query #1 (maybe wording is confusing us) where you say
" Unless repairs or maintenance takes place when you have a tenant in situ then it is never allowable I am afraid - but as rungs then you could get like for like replacement as with the furniture mattresses and these rugs ".-- Should "rungs" be "rugs"?
-- Are we right in understanding from your answer that repairs & maintenance needs to be done when a tenant is in situ to be able to claim - whereas - like for like replacement of items can be done without a tenant in situ?
-- Hence - can we try to claim the replacement furniture, mattresses, laminate flooring etc as like for like replacements because they were already in place and have become damaged due to misuse by tenantsThanks
Brian

HI Brian

Yes apologies - rungs should say rugs and yes you have it spot on that repairs and maintenance to be an allowable expense against rental income have to take place when you have a tenant in situ - if in between tenants then this is solely your cost to bear. Whereas replacement of items like furniture etc you can claim a like for like amount any time (whether before, during or after a tenant is in situ.

You therefore can claim the furniture and rugs and mattresses but not the laminate flooring as not a capital item

Thanks

Sam

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Customer reply replied 1 month ago
Hi Sam,
Thanks for the clarification.
Query #1 - One last question and we are done - for the damaged laminate flooring - if it is replaced while a tenant is in situ (we now have a tenant in place), can it then be claimed as a maintenance/repair cost?
Thanks
Brian

Hi Brian

Then yes it can be - as most definitely an allowable repair/maintenance to the property as you receiving rents at the time

Let me know if I can assist further or if you have all that you need, it would b appreciated if you could rate me for the level of service I have provided or click accept

And if in the future you need any more assistance then do come back to Just Answer

Thanks and have a lovely day

Sam

Sam
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Customer reply replied 1 month ago
Thanks Sam - all questions answered.
Many thanks for your help with these - very happy with your service.
Will close down the query now.
Have a great day yourself.
Best regards
Brian
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Sam
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