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Tax Deductibility of Managing Agents Fee’s

Tax Deductibility of Managing Agents Fee’s

There have been a host of tax changes for landlords over the past couple of years which will significantly eat into landlords’ profits and, in many cases, will wipe them out completely.

It has become more and more important for landlords to understand exactly what reliefs they will be entitled to ensure the impact of the changes are mitigated.

So how will these changes affect you and what other expenses can you claim?

While most capital expenses – those involved in buying and selling a property, such as the purchase price and agent and legal fees – cannot be used to offset your income tax, many other costs can.  An area of debate can sometimes be the deductibility of letting and managing agents fees which we explain further below.

Managing Agents Fee’s

To be tax deductible, expenses must be incurred ‘wholly’ and ‘exclusively’ for the purposes of running your property letting business. Expenses are considered money spent during the day-to-day running of your business.  Professional fees typically include fees charged by your accountant, solicitor or letting/managing agent. You may also deduct fees relating to rent collection. However these fees must still be incurred ‘wholly and exclusively for business purposes’. If professional fees relate to the sale or purchase of property, the fees will be considered capital expenditure and thus will not be tax deductible. This typically includes solicitor’s, agents and surveyor’s fees relating to the sale or purchase of property.

If fees relate to a first time letting or subletting for a duration of more than one year, these fees are considered capital expenditure too. Professional fees relating to the lease’s renewal are tax deductible as long as the renewal period does not exceeding 50 years.

Before you Submit a Tax Return

The changes are here and landlords have to be aware of the tax implications to ensure the transaction is commercially viable.  As a landlord you must submit a self-assessment tax return each year. If an accountant prepares this for you the fees are also tax deductible!

 

Post written by

jdb