Rental accounts and accountant fees

Discussion in 'Accounts & Finance' started by John44, Apr 14, 2020.

  1. John44

    John44 UKBF Contributor Free Member

    80 1
    Hi,

    I wondered how many of you now treat accountant fees as a taxable deduction and do you spread the cost over the properties in the portfolio when filing the tax return? I know years ago, they weren't treatable as a deduction as only the rental accounts preparation element was deductible and not the tax filing so Accountants didn't bother to include them. Has this moved on to a 100% claim for you Accountants?

    John
     
    Posted: Apr 14, 2020 By: John44 Member since: Jan 25, 2013
    #1
  2. SteveHa

    SteveHa UKBF Ace Free Member

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    No. Nothing has changed.
     
    Posted: Apr 14, 2020 By: SteveHa Member since: Jun 16, 2016
    #2
  3. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    The fees for preparing rental accounts are a deductible expense for the rental business.

    If the preparation of the return beyond the property pages is simple enough, some Accountants would argue that any deduction for the personal benefit of the return is negligible. This is easier to justify when property income is the only other income.

    If the Return is solely required because of the need to report the property income, it is virtually accepted as a related cost.
     
    Posted: Apr 14, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #3
  4. SteveHa

    SteveHa UKBF Ace Free Member

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    What is "accepted" (though I would argue ignored is a better word) and what is easy to justify does not make the law, and the law is that an expense in business (whether a trade or letting) is only deductible for tax purposes where it is an expense incurred in that business.

    The law further makes clear that completion of an individual's Tax Return is a personal event, and not a business event (TMA 1970). Ergo, the cost of completing a Tax Return can never be a tax deductible expense.
     
    Posted: Apr 14, 2020 By: SteveHa Member since: Jun 16, 2016
    #4
  5. Energise Accounting

    Energise Accounting UKBF Ace Full Member

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    Totally agree. Just had this disagreement with a client.
     
    Posted: Apr 14, 2020 By: Energise Accounting Member since: Sep 24, 2014
    #5
  6. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    no charge for Tax return completion - freebie

    Only charge for property accounts completion & CGT computations on property sales.

    Once you have the figures to hand the actual time taken to complete a Tax Return with bespoke tax software is minimal.
     
    Posted: Apr 14, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #6
  7. SteveHa

    SteveHa UKBF Ace Free Member

    1,772 364
    UKCA, I'm not saying that what you are doing is morally wrong, and the "free" SATR is a commonly used workaround, and to be honest, where it's just a property letting business, the difference in cost is probably negligible.

    If I were HMRC getting on my high horse (and I'm not, anymore) I might take exception at including the CGT comp as an expense of the letting business, but that is, as I say, high horse time.

    Where it gets awkward is if there is a trade as well, and possibly an investment portfolio that needs to be analysed to ensure the correct SATR entries (e.g. Hargreaves Lansdowne reports running to several pages including interest, dividends, share purchases, reinvestment and disposal).

    With a Return like that, you would struggle to defend the whole cost as being a business cost (whether trade or letting) if HMRC challenged it.

    Of course, the likelihood of HMRC challenging it is, I must admit, remote. That doesn't nullify the strict interpretation of the law (it's no less illegal to rob a jeweler's if you don't get caught)

    As an aside, is anyone aware of whether or not Digita is up to date for 19/20, yet? I don't recall seeing any updates for a while, but it does seem happy to create 19/20 Returns.
     
    Last edited: Apr 14, 2020
    Posted: Apr 14, 2020 By: SteveHa Member since: Jun 16, 2016
    #7
  8. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    i meant these would be allowable as a CGT cost - advisory fees.

    Agreed a more complicated tax return I would issue a separate fee invoice for completion so that there would be no dispute with HMRC of the non allowable cost.
     
    Posted: Apr 14, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #8
  9. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    don't use. TaxCalc much better product
     
    Posted: Apr 14, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #9
  10. John44

    John44 UKBF Contributor Free Member

    80 1
    It doesn't seem to me that things have moved on then! The tax returns are simple enough with interest, income from a couple of pension sources but a property portfolio of 20 properties which would suggest it could be deductible. For the avoidance of doubt though and allocating the fee across the portfolio then it seems a lot of hassle and probably best to exclude?
     
    Posted: Apr 15, 2020 By: John44 Member since: Jan 25, 2013
    #10
  11. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    why do you need to allocate across the portfolio other than for your own internal benefit - not required for tax return purposes.
     
    Posted: Apr 15, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #11
  12. SteveHa

    SteveHa UKBF Ace Free Member

    1,772 364
    I'm not being deliberately contrary here, and UKCA is not suggesting anything that is not common practice. On a strict interpretation of the law, then you would have to apportion.

    In real life, does anyone even care?
     
    Posted: Apr 15, 2020 By: SteveHa Member since: Jun 16, 2016
    #12
  13. John44

    John44 UKBF Contributor Free Member

    80 1
    Exactly, just internal detail for the client and for the supplementary property pages if you fill them out to detail.
     
    Posted: Apr 15, 2020 By: John44 Member since: Jan 25, 2013
    #13
  14. UK Contractor Accountant

    UK Contractor Accountant UKBF Legend Full Member - Verified Business

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    ? not according to HMRC

    If you’ve more than one UK property, you need to add together all your rental receipts and expenses and treat them as one business when working out your profit or loss.
     
    Posted: Apr 15, 2020 By: UK Contractor Accountant Member since: Sep 18, 2013
    #14
  15. SteveHa

    SteveHa UKBF Ace Free Member

    1,772 364
    I was talking about apportioning the cost between rental income and non-rental income, rather than the whole.

    Having said that, you know enough not to trust what HMRC say. Let's get back to HMRC's view of "who must complete a Tax Return".
     
    Posted: Apr 15, 2020 By: SteveHa Member since: Jun 16, 2016
    #15