January questions and answers

Newsletter issue - January 2018.

Q. I have recently bought a residential property to rent out. To enable me to purchase this property I took out a mortgage on my own home and I used the money to buy the rental property. Can I claim tax relief for mortgage interest against my rental income?

A. You should be aware that the rules for residential landlords claiming tax relief on interest paid changed from April 2017. The answer to your question is, yes, you can offset the interest you are paying on this mortgage against the rental income you are receiving from the purchased property. The HMRC Business Income Manual (at BIM45685) confirms that ‘the security for borrowed funds does not determine the use of those funds'.

Q. I am an IT consultant and I provide my services via my limited company, which operates outside the IR35 rules. I started working on my current contract just over two years ago - although when I started, I did not know that it would last this long. Do the temporary work place rules on allowable expenses apply in this situation?

A. There are a number of circumstances where, even though an employee attends a workplace to perform a task of limited duration or for some other temporary purpose, it will still be treated as a permanent workplace. This will be the case where the 24-month or fixed term appointment rules apply or where the workplace is a depot or base.

The 24-month rule prevents a workplace being a temporary workplace where an employee attends it in the course of a period of continuous work which lasts, or is likely to last, more than 24 months.

HMRC's guidance on employee travel (Booklet 490) states (at section 3.21):

‘Where it is expected that the employee will attend a workplace to perform a task of limited duration or for some other temporary purpose for a period of less than 24 months, the workplace will be a temporary workplace from the outset.

However, if at a later date circumstances change and the employee is required to attend the workplace for a period that extends beyond 24 months, it will cease being a temporary workplace from the date that the expectation changed.'

Q. How is an estate valued for inheritance tax purposes?

A. Inheritance tax on death will be calculated on the net value of the estate. The net value of an estate is effectively assets less liabilities.

Examples of assets include, land and property, shares and securities, savings, jewellery, paintings and antiques. Assets within an estate on death will also include any assets gifted within 7 years of death.

Liabilities include, credit card debts, loans, overpayments of pensions, outstanding utility bills. The estate will also be reduced by reasonable funeral costs and any income tax or capital gains tax.

An estate will take into account all assets and liabilities of a person. In order for the debt or liability to be an allowable deduction from the estate, it must be owed by the deceased at the date of death. There must be a genuine commercial reason for the liability and if included within the estate, it must actually be a liability that is repaid from the estate.

Liabilities will be paid either out of the estates available cash or can be via the sale of an asset or by the personal representatives taking out a loan.

What our clients say about us...

  • "Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."


  • "I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."

    Neil Price - Managing Director at Work Relief Charity Recruitment

  • "Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"

    Lee Westrap MBCS - Director - Bulldog IT Services

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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk