Interest payments on rental flats

We are renting my wifes (pre marriage) flat out, having just done the tax calcs for 2004-2005, it has raised a question in my mind for the 2005-2006 tax year.

During 2005-2006 we had a tenant in from April to July, we then moved out of our primary residence into the flat while our primary residence had the builders in for a month. Finally we moved back in August, the flat was then rented from November onwards.

I am right in thinking that for calculating the profit on the rental property I should pro-rata out the 30 or so days we were in the property for mortgage+service charge purposes?

Also does this have any CGT implications (my guess is not)? We're not planning on selling the rental property anytime soon but we may sell our primary residence at some point over the next few years.

Peter

Reply to
Peter Ibbotson
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You mean treat 1/12 of the year's expenses as disallowable? Yes, that would be the honest thing to do. Thousands wouldn't. Don't forget insurance, and probably most of your other expenses too.

No. You haven't really changed your PPR. You may have had two residences for a while, and lived in the non-main one temporarily, but that doesn't really make the rental flat acquire PPR status, because (presumably) you did not, at the time you moved into it, intend to make it your permanent home. That means your main home retains its full PRR entitlement.

Reply to
Ronald Raygun

Thanks for that, I agree that lots of others wouldn't be that honest, but since the IR has been snaffling the expected income out of my wifes PAYE she'll be due a refund which may mean they look a bit closer at the numbers.

Peter

Reply to
Peter Ibbotson

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