Renting out UK home tax implications

[Him again]

Dear folks

 

As this site is feqented by greater minds then my own I would like to take the opportunity post a question as I am p*sssed about at the moment by our buyer.

 

We are in the process of selling our house in the UK and the buyer knows that we are off to Australia once completed us and them have signed the contract for the contrat exchange, but they are not paying the 10% deposit for the contract exchange meaning that this can't be completed and therefore it is not legally binding now they want a reduction on the price and are stalling the process assuming that we are desperate.

 

Naturally we are not desperate and I wont take this laying down so therefore we have set a deadline pay up before Friday or I use the technicallity that they are playing on to my advantage and take the house of the market and and rent it out. This is something that we should have considdered many months ago as the sums are working out for us.

 

Now after a long winded intro the question is that allot of items are tax deductable, but what if we end up with more tax deductions then tax liabillity do we get a tax refund of HMR i.e. if we are laible for £5000 and we made £6000 in costs does the taxman pay the £1000?

 

Any advise would be welcome if anybody is letting out there UK home as I have read threads in the past but can't find them.

 

Thanks

[Diane]

You probably (definitely) need someone a lot cleverer than me to answer this, but from a blonde point of view all I can say is I've never known any tax office to pay out money that you haven't first paid to them! i.e. losses might be able to be offset against tax owed or paid, but if your losses are more than you have paid, or are due to pay to them, then the most you could hope for is to carry the loss over to a subsequent year to put against money you are due to pay to them then!

[NicF]

You probably (definitely) need someone a lot cleverer than me to answer this, but from a blonde point of view all I can say is I've never known any tax office to pay out money that you haven't first paid to them! i.e. losses might be able to be offset against tax owed or paid, but if your losses are more than you have paid, or are due to pay to them, then the most you could hope for is to carry the loss over to a subsequent year to put against money you are due to pay to them then!

 

 

When I did my accounting diploma it was certainly the case that a buisness could carry a loss over to the following year, although there are various rules around what you can carried over and for how long. I didn't study personal tax but I would imagine that the personal tax rules would be similar, in that you can carry losses over to the following tax year under certain circumstances but you willmot get money back that you haven't paid.

[Him again]

Diane and NIcF thanks for the replies it realy looks like I am ending up at this route as we now have been through the emigration route for years and we are detemend to get to Adelaide in the next couple of months, now the tricky business of negotiating with the mortgage company and once that this completed that we are off.

 

We were due to fly on Mon 25 February which has now been postponed until further notice, so frustration is now boiling over at this stage in time, so many things to organise once the situation has been secured.

[snifter]

I'm going to suggest going and having a read or post this over on our sister site Poms in Oz. Lots of people rent their homes out while living in Aus and have posted about it over there.

[Andrew from Vista Financial]

Hi Him again

 

Now the tax implications in Australia of renting out a UK property will firstly be decided upon yur visa status, whether you are permanent or temporary will make a difference.

 

If Permanent the income less allowable expenses/deductions will have to be declared in Australia and taxed accordingly.

 

If you are in profit and have paid tax in UK then generally a tax credit will apply however if it is just one UK rental property with no other income sources it may be likely that any profit would be under the tax free threshold so no tax owed in any event (Form NRL1 can be completed so that tax is not deducted from rental income http://www.hmrc.gov.uk/cnr/nrl1.pdf)

 

Losses can be carried over, see here for how ATO treat losses as well as foreign losses http://www.ato.gov.au/corporate/PrintFriendly.aspx?ms=corporate&doc=/content/00262223.htm however you would not receive tax back for income losses only overpayment of tax.

 

Note that for temporary residents the tax situation in Australia is very different.

 

A lot of people have gone down the path of renting out there UK property due to not be able to sell or get what they would want.

 

If this is a path that you want to take you might want to have a read of this thread http://www.pomsinadelaide.com/forum/pensions-mortgages-ask-vista/31687-cant-sell-uk-property-before-moving-oz.html

 

 

Regards

 

 

Andy

Edited February 19, 2013 by Andrew from Vista Financial

[Him again]

Dear Folks

 

First of all thanks for the support an clarification offered here on my question above, luckily the buyer has seen sense and we exchanged contracts yesterday.

We are looking at flying out on the first of April just got the daunted task on informing my director and line manager later this morning, can't wait till this is done as I am not looking forward to this part.

 

 

Thanks

 

Him again