# Rental Property - Deductible expenses



## liquidfinance (Jan 28, 2011)

I'm just trying to get a few things straight and would be happy for any advice. 

I have a property in the UK and since I moved here this has been rented by my sister and her fiance. Now they have just purchased their own place and this leaves me with the choice of renting or selling. 

I don't owe a great deal so I'm thinking of using a lettings agency to manage the rental as I can't expect friends / family to run around for me and I don't want to be trying to deal with problems from over here. The agency charges a 10% fee and an extra 3% insures for legal costs and 12 months rent payments if you have a non paying tenant.

Now since it has been rented the scenario has been straight forward. 

Collect rent and pretty much just deduct the interest expense.

They move out this weekend. I will be going back home in October for a week. Whilst there we will be staying at the property and I plan on discussing things with the lettings agent and most likely doing some painting and a few other odd jobs. 

From when my sister leaves until I set up an agreement with the lettings agent will my interest expense be deductible from the existing profits?
Will paint and other sundry decorating items be deductible?
I'm thinking of having new guttering and facia. Would this be classed as a captial expense and how would deductions work for this? Looking through this I believe it would be claimed as CCA.


Any other pointers would be appreciated.


Thanks


----------



## Potato (Apr 3, 2009)

Before you get into that nitty gritty, how do you deal with the UK-source income? Do you file a separate tax return there, and if so should you ask on ukmoneyforum.com? 

What kind of return do you expect (and avoid a yield on cost fallacy)? Are you planning on returning some day? Is it worth the risk and headaches to hold on?


----------



## liquidfinance (Jan 28, 2011)

It is taxed as income the same as if it were income from a rental here in Canada. UK Tax is irrelevant as the rents would be below the UK personal allowance. I would have to fill out form T776 Statement of real estate rentals. 

The location is largely irrelevant for tax purposes. 

I would never say I wont be back to the UK to live. Risks and headaches would be taken care of through the agency. The market is still far from ideal so I doubt it would sell quickly. I haven't ruled this out and will be getting some valuations in October as well.


----------



## Potato (Apr 3, 2009)

I don't think the location is irrelevant at all. Do you use the UK's rules for what's an eligible expense and how to treat capital vs current costs, file a tax return there, and carry the _net _income back to Canada as foreign-source other income, or do you use the T776 and report all the line items as though it's in Canada? There are plenty of sites out there warning Canadians that US rentals have to file US returns, so I don't think you can immediately assume that the UK wouldn't have similar headaches in store.


----------



## liquidfinance (Jan 28, 2011)

There is no tax to pay in the UK for my set of circumstances so no eligible expanses to claim against. As a BritishCitizen I qualify for my annual personal allowance. £8105 or $13211 tax free income. Gross rents will probably be £6500 max. If I was over the threshold then it would be a whole different headache where the UK rules on expenses and allowances would come into play Taxes would be payable and I would then have to claim a credit against taxes paid when filing with the CRA. 

You use the T776 and report as though it's in Canada. I do have to file a UK Self assessment tax return declaring gross rents and expenses but as per the above it's really just a paperwork exercise. I will see what's common practice on a couple of British sites as there are many people stuck renting because of either being unable to sell their property or not wanting to sell for the price being offered.


----------

