Question bank chapter 3 .

Q1.Edmond Brick owns four properties which are let out. The following information relates to the tax year
2012/13:
Property one
This is a freehold house that qualifies as a trade under the furnished holiday letting rules. The property
was purchased on 6 April 2013. During the tax year 2013/14 the property was let for eighteen weeks at
370 per week. Edmond spent 5,700 on furniture and kitchen equipment during April 2013. Due to a
serious flood 7,400 was spent on repairs during November 2013. The damage was not covered by
insurance. The other expenditure on this property for the tax year 2013/14 amounted to 2,710, and this
is all allowable.
Property two
This is a freehold house that is let out furnished. The property was let throughout the tax year 2013/14 at
a monthly rent of 575, payable in advance. During the tax year 2013/14 Edmond paid council tax of
1,200 and insurance of 340 in respect of this property. He claims the wear and tear allowance for this
property.
Property three
This is a freehold house that is let out unfurnished. The property was purchased on 6 April 2013, and it
was empty until 30 June 2013. It was then let from 1 July 2013 to 31 January 2014 at a monthly rent of
710, payable in advance. On 31 January 2014 the tenant left owing three months rent which Edmond
was unable to recover. The property was not re-let before 5 April 2014. During the tax year 2013/14
Edmond paid insurance of 290 for this property and spent 670 on advertising for tenants. He also paid
loan interest of 6,700 in respect of a loan that was taken out to purchase this property.
Property four
On 6 April 2013 the property was let to a tenant, with Edmond receiving a premium of 15,000 for the
grant of a five-year lease. He also received the annual rent of4,600 which was payable in advance.
During the tax year 2013/14 Edmond paid insurance of 360 in respect of this property.
ROOM
1.Furnished room During the tax year 2013/14 Edmond rented out one furnished room of his main
residence. During the year he received rent of 5,040, and incurred allowable expenditure of 1,140 in
respect of the room. Edmond always computes the taxable income for the furnished room on the most
favourable basis.
2. Barbara rents a furnished room in her main residence. Gross rents are 85 per week and expenses
amount to 120 per year .
Q2.peter .
(1) Peter owns two properties, which are let out. Both properties are freehold houses, with the first
property being let out furnished and the second property being let out unfurnished.
(2) The first property was let from 6 April 2013 to 31 August 2013 at a monthly rent of 500, payable in
advance. On 31 August 2013 the tenant left owing two months rent which Peter was unable to recover.
The property was not re-let before 5 April 2014. During March 2014 Peter spent 600 repairing the roof of
this property
(3) The second property was purchased on 1 July 2013, and was then let from 1 August 2013 to 5 April
2014 at a monthly rent of 820, payable in advance. During July 2013 Peter spent 875 on advertising for
tenants.For the period 1 July 2013 to 5 April 2014 he paid loan interest of 1,800 in respect of a loan that
was taken out to purchase this property.
(4) Peter insured both of his rental properties at a total cost of 660 for the year ended 30 June 2013, and
1,080 for the year ended 30 June 2014. The insurance is payable annually in advance.
(5) Where possible, Peter claims the wear and tear allowance.

Q3.leticia
The property was acquired on 1 May 2013 and was immediately let to a tenant, with Leticia receiving a
premium of 45,000 for the grant of a five-year lease. During the period 1 May 2013 to 5 April 2014
Leticia received four quarterly rental payments of 2,160 per quarter, payable in advance.and allowable
expeses are 5000 .

Q4.flick
(1) Flick owns a freehold house which is let out furnished. The property was let throughout the tax year
2013/14 at a monthly rent of 660.
Question bank chapter 3 .



(2) During the tax year 2013/14 Flick paid council tax of 1,320 in respect of the property, and also spent
2,560 on replacing damaged furniture.
(3) Flick claims the wear and tear allowance.

Q5..mark.
(1) Mark let out a furnished property throughout the tax year 2013/14. He received gross rents of 8,600,
5% of which was paid to a letting agency. During December 2013 Mark spent 540 on replacing
dilapidated furniture and furnishings.
(2) From 6 April 2013 to 31 December 2014 Mark let out a spare room in his main residence, receiving
rent of 350 per month.
Q6..
Josie owns two properties, which are let out. Property one qualifies as a trade under the furnished holiday
letting rules, whilst property two is let out unfurnished. The income and allowable expenditure for the two
properties for the tax year 2013/14 are as follows:
Property one Property two

Income 6,600 7,200
Allowable expenditure 9,700 2,100










Answer to Q1
Property one

Rent receivable 370 18 6,660
Less:
repairs (7,400)
other allowable expenditure (2,710)
capital allowances
5,700 (covered by AIA) (5,700)



Loss (9,150)

Property two

Rent receivable 575 12 6660
Less :
council tax (1,200)
insurance (340)
wear and tear allowance
10% (6,900 1,200) (570)


Profit 4,790

Property three
Question bank chapter 3 .


Rent receivable 710 7 4,970
Less:
insurance (290)
advertising (670)
impairment loss 710 3 (2,13)
loan interest (6,700)


Loss (4,820)
Property four

Premium taxable as property business income (W) 13,800
Rent receivable 4,600

18,400
Less:
insurance (360)

18040

WORKING .
Premium paid 15,000
Less:
2% (5 1) 15,000 (1,200)


Assessable premium 13,800
Question bank chapter 3 .


ROOM 1.
Furnished Room
Rent receivable 5,040
Less:
rent a room relief (note) (4,250)

Profit 790
Note. Claiming rent a room relief in respect of the furnished room (5,040 4,250) = 790 is more
beneficial than the normal basis of assessment (5,040 1,140) = 3,900.
Room 2 .
(a)Normal way
.
Gross rent (85 52) 4,420
Less:
expenses (120)
Wear & tear (10% 4,420) (442)

Property Income 3,858

(b) rent a room relief

Gross rent (85 52) 4,420
Less:
Rent a Room Relief (4,250)

Property Income 170

Barbara should elect for the rent a room relief in 2013/14 by 31 January 2016
Answer to Q2. peter
Property income

Property one rent receivable 500 5 2,500
Property two rent receivable 820 8 6,560
9,060
Less:
Irrecoverable rent 500 2 1,000
Repairs to roof 600
Advertising 875
Loan interest 1,800
Insurance
(660 3/12 + 1,080 9/12) 975
Wear and tear
(2,500 1,000) 10% 150
(5,400)
Property income 3660


Question bank chapter 3 .


Answer to Q3. Leticia Stone
rent receivable (2,160 4) = 8,640 11/12 7920
less , allowable expenses (5000)
profits 2920
answer to Q4.
Rent receivable 660 12 7,920
Less :
council tax (1,320)
wear and tear allowance
(7,920 1,320) 10% (660)
Furniture 0
Business property profits 5,940

Tutorial note
No deduction is available for replacement furniture where the wear and tear allowance is claimed.
Answer to Q5.
Income
Rent from furnished property 8,600
Rent from spare room (W1) 0
Less expenses
letting agent fees (430)
wear & tear (8,600 @ 10%) (860)
7,310
Note. There is no relief for expenditure on furniture as wear and tear allowance is given.
W1. Rent-a-room relief
Received: 350 9 = 3,150
This is below the limit of 4,250 and therefore this income will be exempt
Answer to Q6.
Property business income

Property one
(6,600 9,700) = (3,100) loss c/f against FHL income note
Property two
Income 7200
Less: expenses (2100) 5,100
profits 5,100


Note . as the FHL losses are only be carried farward against future profits of the same FHL , so thats
why we can not aggregate it with the other business property profits ..
Question bank chapter 3 .





Question bank chapter 3 .