10% Wear and Tear Allowance - Calculating the net rent

Discussion in 'UK Accountancy' started by Malcolm, May 19, 2008.

  1. Malcolm

    Malcolm Guest

    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
     
    Malcolm, May 19, 2008
    #1
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  2. 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.
     
    Ronald Raygun, May 19, 2008
    #2
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  3. Malcolm

    Malcolm Guest

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


    Even for foreign holiday lets?
     
    Malcolm, May 19, 2008
    #3
  4. Malcolm wrote:

    > "Ronald Raygun" <> wrote in message
    > news:87dYj.5945$...
    >>
    >> 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.
     
    Ronald Raygun, May 19, 2008
    #4
  5. Malcolm

    Malcolm Guest

    "Ronald Raygun" <> wrote in message
    news:NegYj.6023$...
    > Malcolm wrote:
    >
    >> "Ronald Raygun" <> wrote in message
    >> news:87dYj.5945$...
    >>>
    >>> 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
     
    Malcolm, May 19, 2008
    #5
  6. Malcolm wrote:

    > "Ronald Raygun" <> wrote
    >> Malcolm wrote:
    >>> "Ronald Raygun" <> 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.
     
    Ronald Raygun, May 19, 2008
    #6
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