Allowable expense for accountancy?

[WPP63]

I would be grateful for your thoughts/opinions on allowable expenses, in this case accountancy.

I have a house rental business, with 16 properties. The properties are owned by me personally, not in a company.
Before I had the property business, I personally completed my tax returns (I was employed and had some investment income).

I do not have the expertise to complete tax returns involving the properties so I now use an accountant.

The accountant argues that 20% of the time in preparing the tax return is spent on my personal finances, not the properties. So he says that only 80% of the accountancy bill is allowable as a business expense.

However it is the case that the sole reason for using the accountant is because of the business. I would still complete my own tax returns otherwise.
My position is that the use of an accountant is exclusively triggered by the business (even if in so doing he has to take in personal finances because you cannot separate them).

So as the cost is solely generated on account of the business I believe all the accountancy cost should be allowable.

What do you all think?

Many thanks!

 

[MyAccountantOnline]

I would be grateful for your thoughts/opinions on allowable expenses, in this case accountancy.

I have a house rental business, with 16 properties. The properties are owned by me personally, not in a company.
Before I had the property business, I personally completed my tax returns (I was employed and had some investment income).

I do not have the expertise to complete tax returns involving the properties so I now use an accountant.

The accountant argues that 20% of the time in preparing the tax return is spent on my personal finances, not the properties. So he says that only 80% of the accountancy bill is allowable as a business expense.

However it is the case that the sole reason for using the accountant is because of the business. I would still complete my own tax returns otherwise.
My position is that the use of an accountant is exclusively triggered by the business (even if in so doing he has to take in personal finances because you cannot separate them).

So as the cost is solely generated on account of the business I believe all the accountancy cost should be allowable.

What do you all think?

Many thanks!

Strictly your accountant is correct but have a read here https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2120

 

[Paul Kelly ICHYB]

For the purpose of self-assessment, surely personal finances need to be included?

 

[Newchodge]

For the purpose of self-assessment, surely personal finances need to be included?

But is it an expense of the business alone and, therefore claimable in full. The OP had to submit SA before they owned the properties. Perhaps the answer is to get the accountant to do all the calculations for the properties, give the OP the figureds for the UP to submit their SA. Then all the accountant's work is chargeable.

 

[Paul Kelly ICHYB]

But, being self employed, they are the 'company', so inextricably linked?

 

[MyAccountantOnline]

For the purpose of self-assessment, surely personal finances need to be included?

Yes they do hence the fees aren't wholly and exclusively for the letting business.

 

[MyAccountantOnline]

But is it an expense of the business alone and, therefore claimable in full. The OP had to submit SA before they owned the properties. Perhaps the answer is to get the accountant to do all the calculations for the properties, give the OP the figureds for the UP to submit their SA. Then all the accountant's work is chargeable.

I doubt it's something many accountants would do. Bear in mind (from the link I posted) HMRC state -

Strictly, any additional fees incurred for computing and agreeing the tax liability on rental business profits are not deductible. But, under a long-standing practice, normal recurring legal and accountancy fees incurred in preparing accounts or agreeing the rental business tax liability can be deducted.

 

[DWS]

Pretty much the same for Director/Shareholders, if this is their only income then the accountant costs of their SA is not tax deductible, hence why some accountants do this for free and only charge for the company accounts.

 

[Paul Kelly ICHYB]

hence why some accountants do this for free and only charge for the company accounts.

Hence the system can be perverted, as the accountant can say it is free but bump ups the business costs!

Probably very low down on HMRCs list of reasons to slap wrists!

 

[numbersrule]

What do you all think?

Referring to DWS comment at 1:29pm on 9th Jan 2024, it seems to me that you should ask your Accountant why they are charging for dealing with your personal tax. It seems some Accountants are willing to include for dealing with personal tax and in some cases may not even mention personal tax on their invoice.

Of course, before you embark on this line of enquiry you should also ask yourself are your personal tax affairs highly onerous with complex investment scenarios? Maybe in your case your Accountant feels justified in highlighting and specifically charging for personal tax. Only you can answer that. Sixteen properties suggests that your personal tax affairs are the equivalent of calculations for 4 properties. Does that seem reasonable?

 

[WPP63]

Thanks everyone for your comments, much to chew on.