Expenses when letting a house

It's the accounting year (hence tax year) in which the liability was incurred - so it's the previous year.

However, the same rule applies for income. So rent "earned" in the previous tax year must be included in that year, even if not rec'd from agent until this year.

Generally an agent acts on your behalf, and so the workmen are really working for you, not for the agent. Therefore you ought to treat the workmen's invoices as though they had been issued directly to you, and so if the work was (carried out and) invoiced by the workmen during

2009/2010, then that's the tax year during which it counts as an expense of your letting business.

Strictly speaking, by the way, the agent should not be invoicing you for this but rather should be issuing you with a statement of outlays and rent received etc. They only thing they should be actually invoicing you for is their management fees.

What rent do you propose to declare in 2010/2011? What matters for tax purposes is the period *for which* the rent was payable by the tenants. It's irrelevant when (or even whether!) they actually paid it to the agent, and it's also irrelevant when you received it from the agent.

If you're saying that the cost of the work was less than a month's rent, and if the agent deducted the cost of the work from April's rent, then that's OK, you would count all of April's rent as 2010/2011 income despite counting the work as a 2009/2010 expense.

Ideally you should be splitting April's rent (if your rent months run from the 1st) and count 5/30 of it to the old year and 25/30 to the new. It's called the accruals principle, though some call it splitting hairs.

Ok. Thanks.

I'm not sure if they're invoicing me or not. Everything appears on a single "statement" titled "Invoice".

Yes, I know that. The rent is for something like 17th April to 16th May (I'd have to pull out my records to check the exact day of the month but it's close to that) so the rent goes into the 2010/11 tax year.

Makes sense, thanks. Just a bit of a nuisance as I can't just drop the paperwork into the folder for one tax year but have to remember that it overlaps. (The managment fees will still go into the 2011 tax year - I suppose the simplest thing is to go and find a photocopier and put a copy into the folder for the other tax year)

I didn't know that. I thought the rent had to be declared in the tax year it became due so if the rent became due on 4th April then the whole months rent would go into the earlier tax year. (Same way that employment income is taxed in the year it is paid)

It won't make any difference this year as the same tenant has been in for the whole year and the rent hasn't changed.

I do apportion insurance expenses on a daily basis.

Note to self - try and avoid incurring any expenses via the agent in late March, early April.

Tim.

If you don't have a copier and it's a nuisance to go and find one, an alternative is to write a tatty scrap of paper for the 2010/2011 folder telling you where in the 2009/2010 folder the original is to be found, should you ever really need it. The salient details can just be copied by hand. As soon as you've done your tax return for 2009/2010, or perhaps later, as soon as you start to prepare your 2010/2011 accounts, you can then transfer the original into the 2010/2011 file and the tatty paper to the 2009/2010 file.

However, unless the agent's statement contains a lot of guff relating to

2009/2010 rent, can't you just separate the workmen's copy invoices from the agent's statement and put them in the 2009/2010 file, but the agent statement into the 2010/2011 file?

You've sown a seed of doubt in my mind now. I still think you're wrong, but I'm not sure you're wrong. Where a payment frequency is monthly, it's probably not that essential to apportion.

A little googling seems to confirm that you are indeed wrong. Look at for a comparison of the two methods allowed, namely the cash basis and the earnings basis. You're allowed to use the cash basis only if your gross receipts are below £15k, and then you count income and expenses to the tax years in which they were received/paid. Otherwise you must (but in any case you may) use the earnings basis which allocates to tax years in which income arises and expenses are incurred. It explains that rent should be apportioned to periods covered, not to when it is notionally due, and that expenses belong to when the work was done even if the invoice may be late. It seems you can't mix and match, if you apportion anything you should apportion everything.

But it would make a difference if you were to change your method from not apportioning to apportioning, since it would result in two consecutive years not having exactly 12 full months' rent to their credit. Therefore I would recommend that even though your method may be technically wrong, it's not wrong enough to matter much, and it's better to stick with it than to complicate matters by changing it.

Good. What about mortgage payments? It may seem silly, but I've taken the approach that if I'm apportioning insurance and rent, I might as well apportion mortgage interest as well, even though the mortgage is nearly paid off and the interest is less than £4 a month. (There are advantages to not paying it off completely).

Good point. Although if I did change it I'd end up double counting some of the rent that was declared in the previous tax year so I can't see the tax man complaining.

No mortgage. I gave my girlfriend a share of the house some years ago and it is easier to do that when there is no mortgage.

I keep all the accounts for the house and usually it's very simple. Infact I thought it was all done until this statement/invoice appeared and then I realized I didn't know where these two bills had to go.

Usually, my girlfriend does her tax return on the first day you can do it online. Fortunately, this year she hasn't so putting things right isn't a problem. (I always have to wait a couple of months until I get my p11d? and p60)

Tim.

No you wouldn't, well, you shouldn't.

Say the rental payment covers the period from the 15th of one month to the 14th of the next. Then last year's accounts (2008/2009) would show exactly 12 times the monthly rent, corresponding to the payments due on

15/04/2008 to 15/03/2009.

Next year's accounts (2010/2011) would also show exactly 12 times the monthly rent, made up of the 11 full payments for the months beginning on 15/04/2010 to 15/02/2011, plus two part-months 06-14/04/2010 and

15/03-05/04/2011 which between them add up to one full month.

But this year's accounts (2009/2010) would omit rent in respect of

06-14/04/09, precisely in order to avoid them being double-taxed. So the accounts of this changeover year should show slightly less than 12 times the monthly rent, namely the 11 payments for 15/04/2009 to 15/02/2010, plus one 22-day part-month of 15/03-05/04/2010, i.e. the total will be (12-9/31) times the monthly rent.

BTW, what I said above "would result in two consecutive years not having exactly 12 full months' rent to their credit" is wrong. Only one year will not have exactly 12 months' rent counted. If you're changing from non-apportioned to apportioned, as in the example just given, the chaneover year will show less than 12 months, but if you wer changing the other way, it would show more than 12. This is because for the changeover year you have to make adjustments so that none of the rent is either double taxed or untaxed.

Well, he wouldn't ever know unless he were to launch an investigation, since on your tax returns you only report the total, not how you arrive at it.