If you have took a while to bring a property to market you will have some costs from before you started receiving rent.
I was speaking to a chap last week in precisely this position. He has been gradually working on a property for a couple of years and it is now ready to bring to market. He said that he had spent a lot of money over the years getting it up to standard.
I would imagine if you ask random people you will probably be split on whether these costs are allowable or not. The costs were only incurred as a result of the property BUT the property business did not start until it was up for rent.
Believe it or not both of these are true but do not prevent a claim from being made for the expenditure. I’ve said a few times that the method of calculating rental business profits is the same as calculating trading business profits is most ways and this is another example.
HMRC’s own manuals include the following at BIM46351:
“The above legislation provides relief in respect of certain expenditure of a revenue nature incurred for the purposes of a trade, profession or vocation before it is commenced.
The relief extends only to expenditure which:
- is incurred within a period of seven years prior to the commencement of the trade, profession or vocation, and
- is not allowable as a deduction in computing the profits of the trade, profession or vocation but would have been so allowable if incurred after the trade had commenced.”
All normal rules regarding capital vs revenue and general deductibility apply but if you spend money before you start renting out it will be allowed so long as it isn’t too old!