ACFI 2308

Property Income Lecture Example Answer: Sue

Net Property Income: Pooled on accruals
Rental Income

Property 1

16,000

Property 2 Rental income 9/12 x 20,000

15,000

3/12 x 24,000

6,000

Grants 20 year lease

21,000

Premium on short lease

P 2% (n-1)P
25K (2% x 9 x 25K)

20,500

Total income

57,500

Less expenses : wholly and exclusively for business of letting

Property 1

Furnished 10% W & T

10% (16,000 800)

1,520

Council Tax

800

Repairs

1,600

Cleaning

500

Redecoration

920

Property 2

Tutorial Solutions Property Income A10

Repairs

3,800

Agents fees

2,500

Loan interest

8,950

Insurance on investment properties

(3,000 x 9/12)+(3,200 x 3/12)
Gardening services

3,050
4,000

27,640

Net property income

(59,250 27,640) less b/f loss 1,300

28,560

Property Income Tutorial Solutions

Tutorial A Answer: Ros

a)

Factory
Rent (accruals basis) 11/12 x 24,000
Short lease premium (Note 1)

=
=

22,000
18,600

4,831

Furnished lettings in Cornwall

Jointly owned asset (Note 2)
50% property income (9,662 x )

Total property income on Ros

45,431

b)

Harry y/e/ 31.12.10

2

Tutorial Solutions Property Income A10

Trading expense claimed by Harry

Rental expense accrued
(1.5.10 31.12.10) 8/12 x 24,000 =
Short lease premium deduction
(Note 1) 930 per year x 8/12 =

16,000
620

Total expense y/e 31.12.10

16,620

Tutorial Solutions Property Income A10

Note 1
Lease premium 30K for 20 years
Property Income
Premium
Less 2% (n-1)P
2% x 19 x 30K

30,000
(11,400)

Assessable on Ros

18,600

Ros is assessed on the rental income of 18,600 on 1 May 2010.

Harry can claim relief for rental income paid but must spread relief over the 20 year lease.
Harry claims relief of 18,600
20 years

930 per annum

Note 2: Cornish Property

Rental for 48 weeks
Less expenses for renting
Water rates
Heat and Light
Interest
Less wear and tear allowance
10% (20,000 2,000)

20,000
2,000
1,400
5,805
1,800

Annual expenses
(Disallow 4 weeks personal use)

11,005
x 48 =
52

(10,158)

Less trips to inspect property

(60 x 3)

(180)

9,662

Note: this does not qualify as FHL as periods of occupation are too long.

Tutorial Solutions Property Income A10

Tutorial B Answer: Chloe

2010/11

Building Society Interest

8,000 x 100/80
Dividend
4,500 x 100/90
Property income
(Working 1)
Personal Allowance

(6,475)

Tax Charge
28,275 x 20% =
5,000 x 10% =

Tax liability
Less tax suffered:
Dividend
Interest
Payment on account

(500)
(2,000)
(3,000)

Tax due 31.1.12

Tutorial Solutions Property Income A10

Working 1:
Home
Gross rental income

6,000

Relief for rent a room

(4,250)

Nett rental assessable

1,750

Shop
Rent (accruals) (6250 x 4)
Less:
Bad debt
Agents fees
Insurance
Interest
No relief for extension (Capital)

25,000
6,250
1,250
750
3,250

(11,500)

Joint assets of husband and wife: income split 50:50

13,500

Income assessed on Chloe

6,750

Furnished holiday lettings

Rental
CAs

27,000
(5,000)

22,000

Property Income Pool

(6,750 + 22,000 + 1,750)
Less loss b/f

30,500
(5,750)

24,750

Tutorial Solutions Property Income A10