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10% Wear and Tear Allowance - Calculating the net rent

 
 
Malcolm
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      05-19-2008, 10:16 AM
Hi

I am the leaseholder of a UK furnished flat in a block of flats.
I let the flat on an AST to a tenant who pays the rent, the utilities, and
the rates.
I pay the service and management charges, the ground rent, insurance, and
maintenance.

The SA105 Notes explain that "The wear and tear allowance is equal to 10% of
the net rents after deducting charges
or services that a tenant would usually bear but which are, in fact, borne
by you (such as Council Tax)."

Where can I get a full list of the charges or services a tenant would
usually bear ?
In particular, which of my expenses, i.e. the service and management
charges, the ground rent, the insurance,
and the maintenance charges, would a tenant normally pay, for the purposes
of calculating the net rent ?

Also, I have an apartment in Portugal that I let out for holidays. Guests
pay an all inclusive rent for their stay.
I pay condominium charges, insurance, all utilities, and maintenance and
management costs.
Which of these expenses should I deduct from the gross rent in order to
arrive at the net rent for the 10% wear and tear allowance?

Many thanks
Malcolm


 
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Ronald Raygun
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      05-19-2008, 11:02 AM
Malcolm wrote:

> The SA105 Notes explain that "The wear and tear allowance is equal to 10%
> of the net rents after deducting charges
> or services that a tenant would usually bear but which are, in fact, borne
> by you (such as Council Tax)."
>
> Where can I get a full list of the charges or services a tenant would
> usually bear ?
> In particular, which of my expenses, i.e. the service and management
> charges, the ground rent, the insurance,
> and the maintenance charges, would a tenant normally pay, for the purposes
> of calculating the net rent ?


The tenant would normally pay all charges associated with occupation of
the premises, as distinct from ownership thereof. So he would pay Council
tax and all utilities (gas, electricity, phone, cable, water, sewerage),
but not ground rent, mortgage, buildings insurance, or insurance for what
contents are provided by the landlord (the tenant would pay for insurance
of his own contents). The only grey area lies in service and maintenance
charges. I would reckon the tenant would normally pay that part which
relates to "normal" ongoing maintenance, such as the flat's share of the
cost of cleaning, heating, and lighting of common areas, grass cutting,
the janitor's salary etc, but nothing which goes into a kitty for repairs,
nor management charges of the company which owns the freehold.

> Also, I have an apartment in Portugal that I let out for holidays. Guests
> pay an all inclusive rent for their stay.
> I pay condominium charges, insurance, all utilities, and maintenance and
> management costs.
> Which of these expenses should I deduct from the gross rent in order to
> arrive at the net rent for the 10% wear and tear allowance?


The question does not arise, because there is no WTA for holiday lets.

 
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Malcolm
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      05-19-2008, 01:36 PM

"Ronald Raygun" <(E-Mail Removed)> wrote in message
news:87dYj.5945$(E-Mail Removed) ...
>
> The question does not arise, because there is no WTA for holiday lets.
>


Even for foreign holiday lets?


 
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Ronald Raygun
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      05-19-2008, 02:35 PM
Malcolm wrote:

> "Ronald Raygun" <(E-Mail Removed)> wrote in message
> news:87dYj.5945$(E-Mail Removed) ...
>>
>> The question does not arise, because there is no WTA for holiday lets.

>
> Even for foreign holiday lets?


Of course. Why should foreign holiday lets be any different from
non-foreign holiday lets?

It is not the case, after all, that there is a general rule that WTA
is available for all furnished lets, with UK holiday lets being an
exception.

Rather, the general rule is that all businesses (including all letting
businesses) must account for maintenance/repairs/renewals of business
assets (which in the case of letting businesses includes contents) on
an actual costs basis, and the exception is that, as a concession in
the case of furnished residential lettings only, the WTA method may be
used instead.

 
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Malcolm
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      05-19-2008, 04:32 PM

"Ronald Raygun" <(E-Mail Removed)> wrote in message
news:NegYj.6023$(E-Mail Removed) ...
> Malcolm wrote:
>
>> "Ronald Raygun" <(E-Mail Removed)> wrote in message
>> news:87dYj.5945$(E-Mail Removed) ...
>>>
>>> The question does not arise, because there is no WTA for holiday lets.

>>
>> Even for foreign holiday lets?

>
> Of course. Why should foreign holiday lets be any different from
> non-foreign holiday lets?
>
> It is not the case, after all, that there is a general rule that WTA
> is available for all furnished lets, with UK holiday lets being an
> exception.
>
> Rather, the general rule is that all businesses (including all letting
> businesses) must account for maintenance/repairs/renewals of business
> assets (which in the case of letting businesses includes contents) on
> an actual costs basis, and the exception is that, as a concession in
> the case of furnished residential lettings only, the WTA method may be
> used instead.
>


Many thanks for explaining that.
Regards
Malcolm


 
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Ronald Raygun
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      05-19-2008, 05:14 PM
Malcolm wrote:

> "Ronald Raygun" <(E-Mail Removed)> wrote
>> Malcolm wrote:
>>> "Ronald Raygun" <(E-Mail Removed)> wrote
>>>>
>>>> The question does not arise, because there is no WTA for holiday lets.
>>>
>>> Even for foreign holiday lets?

>>
>> Of course. Why should foreign holiday lets be any different from
>> non-foreign holiday lets?
>>
>> It is not the case, after all, that there is a general rule that WTA
>> is available for all furnished lets, with UK holiday lets being an
>> exception.
>>
>> Rather, the general rule is that all businesses (including all letting
>> businesses) must account for maintenance/repairs/renewals of business
>> assets (which in the case of letting businesses includes contents) on
>> an actual costs basis, and the exception is that, as a concession in
>> the case of furnished residential lettings only, the WTA method may be
>> used instead.

>
> Many thanks for explaining that.


More information here:
<http://www.hmrc.gov.uk/manuals/pimmanual/PIM3200.htm>

In particular, for your holiday property you should be able to claim
plant and machinery capital allowances for contents.

 
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