This is a grey area as far as taxation goes.

The rules for pre-trading expenditure are quite complex, but in theory you can claim expenses incurred in the seven years before commencement of the rental ‘business.

The expenses are treated as incurred on the first day the rental business starts.

Having said that, HMRC will want to examine these expenses closely with a view to establishing whether they were incurred ‘wholly and exclusively‘ for the purposes of the ‘trade.’

Again, in theory HMRC can disallow any expense which has a duality of purpose, but in practice they will usually allow a split to be made.

They will also examine the expenses to see whether they are capital or revenue in nature.

Below is a list of some common types of pre-trading expenditure you are likely to incur before you buy your property:

- travelling costs
- the cost of purchasing dedicated trade/magazines for helping you to find your property
- the cost of telephone calls when phoning estate agents/property vendors, etc.

The important point to note is that each occurrence of a pre-trading expenditure must be incurred wholly and exclusively for the property.

If you are uncertain, seek advice.

This entry was posted on Wednesday, October 8th, 2008 at 8:35 am and is filed under Property Income Tax. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.