Question:
We have a property in the UK which is rented to students. Due to the nature of the type of tenant, the tenants tend to change each year. Is it right that the expense charged by our managing agents for drawing up this agreement cannot be charged as an expense, but rather as a capital charge? We have been renting out this property for 12 years on this basis so it's hardly a new enterprise.
Arthur Weller replies:
If you look at
http://www.hmrc.gov.uk/manuals/pimmanual/PIM2205.htm%20 you can see that if the let is for a year or less, then the legal expenses (such as the cost of drawing up a lease) and the agent's fees are not capital expenditure, and are therefore an allowable revenue expense.
