Property income例题.docx

Property income例题Len owns a small flat in Lancing. He lets it out unfurnished at an annual rental of 1,600 from 1 January 2014. Rent is payable quarterly in advance. On 1 January 2015 he raised the rent to 2,000 pa.RequiredCalculate the property income for 2014/15.Fiona owns a property that she lets furnished on a short term basis. In the year ended 5 April 2015 she had accrued rental income of 2,400 and incurred the following expenses:She has always claimed the 10% wear and tear allowance and has losses brought forward of 500.RequiredHow much is assessable on her as property income in 2014/15?Phil was born in 1966. The house which he received as a wedding gift from Pere, his father, was always let out unfurnished until it was sold on 5 April 2015. The following income and outgoings relate to the property for the tax year 2014/15:Phil has no other income or outgoings for the tax year 2014/15. RequiredCalculate Phil Jones income tax liability for the tax year 2014/15. (2 marks)Tutorial noteThe cost of replacing the propertys chimney is revenue expenditure because the chimney is a subsidiary part of the house (see Samuel Jones & Co v CIR 1951). The cost of the new boundary wall is capital expenditure as the wall is a separate, distinct, entity (see Brown v Burnley Football and Athletic Club 1980).RequiredState the tax advantages of a rental property qualifying as a trade under the furnished holiday letting rules.(3 marks)Furniture and equipment purchased for use in the furnished holiday letting will qualify for capital allowances instead of the 10% wear and tear allowance. The profit from the furnished holiday letting will qualify as relevant earnings for pension tax relief purposes. Capital gains tax entrepreneurs relief, relief for replacement of business assets and gift relief for business assets will potentially be available on a disposal of the furnished holiday letting. Josie owns two properties, which are let out. Property one qualifies as a trade under the furnished holiday letting rules, whilst property two is let out unfurnished. The income and allowable expenditure for the two properties for the tax year 2014/15 are as follows:RequiredCompute Josies taxable property income for 2014/15.(2 marks) Denise grants Timothy a lease to a shop on 30 June 2014.Annual rental 8,000 due on 1 July 2014Term 15 yearsPremium 60,000RequiredCalculate the property income assessment on Denise for 2014/15.RequiredUsing the question Denise earlier, show the relief available to Timothy for the premium paid.On 1 July 2014 Sam purchased a leasehold office building for use in his business.He paid a premium of 80,000 for the grant of a twenty year lease in addition to an annual rent of 10,000 payable in advance on 1 July 2014.RequiredCompute the Landlords property income for 2014/15 and Sams trading deduction.Leticia Stone owns three properties which are let out. The following information relates to the tax year 201011:Property oneThis is a freehold house that qualifies as a trade under the furnished holiday letting rules. Leticia purchased this property on 1 July 2010 for 282,000. The purchase price included 4,600 for furniture and kitchen equipment.Leticia borrowed 220,000 to purchase this property. During the period 1 July 2010 to 5 April 2011 she made loan repayments totalling 14,300, of which 12,700 was in respect of loan interest.The property was let for 22 weeks at 425 per week during the period 1 July 2010 to 5 April 2011.Due to a fire, 12,200 was spent on replacing the roof of the house during March 2011. Only 10,900 of this was paid for by Leticias property insurance.During the tax year 201011 Leticia drove 1,170 miles in her motor car in respect of the furnished holiday letting business. She uses HM Revenue and Customs authorised mileage rates to calculate her expense deduction. The mileage was for the following purposes: MilesPurchase of property 160Running the business on a weekly basis 880Property repairs 130The other expenditure on this property for the period 1 July 2010 to 5 April 2011 amounted to 3,770, and this is all allowable.Property twoThis is a leasehold shop that is let out unfurnished. The property was acquired on 1 May 2010 and was immediately let to a tenant, with Leticia receiving a premium of 45,000 for the grant of a five-year lease. During the period 1 May 2010 to 5 April 2011 Leticia received four quarterly rental payments of 2,160 per quarter, payable in advance.Leticia pays a monthly rent of 1,360 for this property, but did not pay a premium when she acquired it.Property threeThis is a freehold house that is let out unfurnished. The property was let from 6 April 2010 to 31 January 2011 at a monthly rent of 580. On 31 January 2011 the tenant left, owing three months rent. Leticia recovered two months of the outstanding rent by retaining the tenants security deposit, but was unable to recover the balance.On 1 March 2011 a new tenant paid Leticia a security deposit of 1,200, being two months rent, although the new tenancy did not commence until 15 April 2011.During the tax year 201011 Leticia paid loan interest of 9,100 in respect of a loan that was taken out to purchase this property.Other expenditureThe other expenditure on properties two and three for the tax year 201011 amounted to 36,240, and this is all allowable.Furnished roomDuring the tax year 201011 Leticia rented out one furnished room of her main residence. During the year she received rent of 3,170, and incurred allowable expenditure of 4,840 in respect of the room. Leticia always uses the most favourable basis as regards the tax treatment of the furnished room.Required:(a) Calculate Leticia Stones property business loss for the tax year 201011.Note: Your answer should separately identify the furnished holiday letting loss. (13 marks)(b) Advise Leticia Stone as to the possible ways in which her property business loss for the tax year 201011 can be relieved.Note: You are not expected to discuss relief for losses incurred in the early years of trading or relief against chargeable gains. (2 marks)Analyse the information in the question and identify key issues: Property 1: Furnished holiday letting. Think about how relief is given for furniture. Is the expenditure on the roof capital or revenue expenditure? How does the mileage allowance work? Property 2: Unfurnished letting. How is the lease premium dealt with? Property 3: Unfurnished letting. How is the irrecoverable rent dealt with? What is a security deposit?Analyse the information in the question and identify