Claiming Tax Back on Letting Agent Fees and Claiming Letting Agent Fee due to Posting

Discussion in 'Finance, Property, Law' started by Brownie_01, Aug 26, 2011.

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  1. We're being posted to Germany this month and I have a couple of questions that I'd like a bit of advice on please... or even if I can be pointed in the right direction, that'd be great.

    - Can we claim back the VAT on the fees the letting agent we use will charge us? We have filled NRL1 forms in for the landlord tax which is all sorted but the estate agent also charges VAT (@ 20%) on their fees.

    - Someone mentioned that we can claim back the initial letting set-up fee due to the posting. It's going to be a significant amount of money as they charge a month's rent plus VAT. I hadn't heard about this one but if it exists, how do I go about claiming it?

    Many thanks in advance for your responses.
  2. Welcome to ARRSE, Brownie!

    Assumptions: you have let (for the first time ever) your house which is owned by both of you, with a mortgage.

    Your question is focussed on VAT which, in my opinion, is incorrect. VAT is subsumed into all the other charges that you will incur letting your property. You can claim against your rental income for all the expenses of setting up, letting and running your house (including council tax, gardening, mortgage interest etc). The problems are that it is all in arrears, you have to deal with the taxman and you have to submit a tax return once a year!

    Welcome to the strange world of letting property!

    Actions for you:

    Visit the HMRC site and read everything about property letting.
    Consider signing up for electronic submission of your tax return(s).
    Tell your bank/bldg soc that you have let your house due to a posting (ie; no choice). They might charge you!!!
    Tell your insurance company.
    Tell both your taxmen that you are letting your Principal Private Residence (PPR) due to your posting.
    Buy a filing box and put everything of relevance in it. Everything!
    Open a spreadsheet and keep a record of every telephone call, email, letter to anybody to do with the letting.
    If one of you is a 40% taxpayer, don't spend the rent as it comes in!
    Is the letting agent subtracting tax @ 20% before he hands you the rent or have you already spoken to HMRC?

    I am wrestling with a central heating boiler at the moment, so I will back out and let more knowledgeable members entertain you!

  3. As I understand it (I am a landlord too) you can only claim back VAT if you are VAT registered.
  4. Hello!!

    I've already done most of the things mentioned in your post, but it was a very useful checklist and has given me some direction, thanks! ... I find tax and finance issues hard to comprehend so this is confusing me - I only have a simple brain!!

    How do you let the taxmen know about letting out our PPR - is there a form or will a simple "Dear John" letter suffice - I assumed that because we'd put the rental address on the NRL1 form that hmrc would think in a joined up manner but perhaps this is not so...?

    I've had a look at the hmrc website - there's a lot of information there so I think it'll take some time to digest it. From the gist of it, am I right in thinking that I can offset some of the costs incurred during the rental period against the income generated to reduce my tax liability. I've not had to submit a tax return before, is it a case of file everything for each year, summarise it on a form and send it off? Would you advise keeping a file/folder for each tax year the house is rented out?

    Good luck with the boiler.

    Many thanks. Brownie.
  5. You can offset all your relevant expenses against your rent... but what you might consider relevant and what HMRC considers relevant might not be the same! Briefly, you can claim for:

    Mortgage interest (not capital)
    Fees (including VAT etc)
    Services (gardening etc)
    Legal and accountancy
    Maintenance/replacement (go for the 10% pa option IMHO)
    Administration costs (annual visit, postage, telephone) etc

    You cannot offset improvements, mortgage capital etc against rent.

    You cannot offset any losses from letting against your other income (salary, investment, bldg soc interest etc). If you make a loss in any year, you carry it forward. So, if your start-up losses are greater than your rental income in your first year, then you will not pay any tax on your trade but will carry forward those losses to offset against next year's income.

    You can employ an accountant to do the tax work (which is an allowable expense). But it is relatively straightforward once you have sorted out the basics - which is all the accountant's junior will do! About £1-200 pa should cover it but I am guessing.