Report an incentive/finders fee received from the council in the previous tax year

Dear HMRC Admin In light of tenant finder fee / incentive from the council being taxable (community.hmrc.gov.uk/customerforums/ifp/15ce5899-870d-ee11-a81c-6045bd0b20cc), we realised we need to report the incentive received in the 6/4/21 to 5/4/22 tax year. How can we resolve this, please? The context and specifics are below. We let our flat due to relocating within UK. The letting began on 15/2/22. The first rent for 15/2/22 to 14/3/22 was due on 9/4/22 and received late on 11/5/22 due to Universal Credit awaiting documents from the tenant. As per cash basis accounting (payments are associated to the dates of transaction), we did not receive rent in the 6/4/21 to 5/4/22 tax year. The rent from the start of the letting on 15/2/22 to 14/2/23 was received in the 6/4/22 to 5/4/23 tax year, so we will report in the 2022/23 self-assessment. Hence, we were under the impression that this the first tax return would be in this tax year. Whilst preparing the tax return, and in light of the incentive being taxable, we realised the incentive was received on 1/3/22, which falls under the 6/4/21 to 5/4/22 tax year. We have a rental income split agreement from the start of the tenancy on 15/2/22 attributing income 95%/5% between mother/son for the joint leasehold flat. So the total incentive of £4,500, less £464.28 allowable expenses (compliance/safety checks, repairs, etc), attributes £3,833.93/£201.79 income from rental to mother/son for the 2021/22 tax year. Our understanding is that: 1. Son doesn't need to fill self-assessment for 2021/22 as the attributed income is below the £1,000 property allowance, and salary is already taxed via PAYE. 2. Mother's pension plus rental income is below the personal income tax threshold. We'd like to know if a self-assessment is required if the total income is within the personal allowance. If yes, please inform us how to complete the tax return for the previous year. We appreciate your guidance, this being our first time letting. Looking forward to your response. Thank you N & C

Hi
Thank you for your question.
You state that the sons income was £4500 less expenses £468.28 leaving £201.79 which he has claimed the 1000 property income allowance to cover this but if you claim the property income allowance you cannot claim expenses, you can only claim one or the other ,being the one most beneficial to you .
Although you state the mothers income is below the PAYE threshold of personal allowance please see :
Records: set up taxpayer record: criteria for a PAYE / SA record
As the IFP is over £2500 after expenses she would need to complete a 2021-22 Sa return.

Hi HMRC Admin 10 Thank you for informing that only one (either expenses or property income allowance) can be claimed, whichever is most beneficial, noted. And thank you for informing mother needs to complete a 2021-22 SA return as the IFP is over £2,500. We'll get this done. Regarding son's property income, there seems misunderstanding/misinterpretation of our question. To clarify, expenses have not been claimed, as there is no 2021-22 SA return submitted. Hence, this discussion is to find out whether or not the son needs to fill 2021-22 SA. To clarify, the £4,500 is the total IFP. Son's income is the 5% split, which is £225 (4.5k * 5%) without deducting expenses. He wants to use the property income allowance. Your guidance clarified we should not deduct expenses (this part was our error) as property income allowance is being applied in the discussed calculations. Hence, even after the correction (not deducting the expenses), the income is within the £1,000 property income allowance. Does the son need to fill 2021-22 SA return in this instance to use the property income allowance, if the income (without deducting expenses) is £225 (which is below the £1,000 property income allowance)? In other words, is SA return required to notify he wants to use the property income allowance if there is no income to declare over the property income allowance? For context, other income (i.e. job salary) is already taxed via payroll, so we're trying to determine whether or not a SA return needs to be done for the £225 property income. Hopefully, this clarifies the question. Your support is very helpful, much appreciated. Thank you N & C

Hi N S
Thank you for your question.
As the income from property is less than property allowance no reporting/Self Assessment tax return is required.
Thank you. 

Dear HMRC Admin 25 Thank you very much for clarifying/confirming that Self Assessment tax return is not required if the income from the property is less than the property allowance. Thank you for this support service, it's been very helpful. Regards N & C

Hello HMRC Admin We've further questions in the process of filling in the tax return. 1. How do we request self-assessment for mother for 2021/22? We see other enquirers on this forum have been advised contacting the helpline to request returns for earlier years. The Self Assessment helpline (0300 200 3310) is temporarily closed until 4 September 2023. Is there an alternative means of requesting the 2021/22 return now or wait for the helpline to reopen? 2. What's the process of withdrawing the son's tax return for 2022/23? He had registered though realised (through the above discussion) a return is not required for the property income given it's below the property allowance. Do we request the withdrawal via the helpline when it reopens or is there an alternative process? 3. Claiming the property allowance, can "Rent, rates, insurance, ground rents etc" and "Other allowable property expenses" deductions be made? Our understanding of "if you claim the property income allowance you cannot claim expenses, you can only claim one or the other, being the one most beneficial to you" advice above was that no expenses can be claimed if the property allowance claimed. However, the guidance notes when filling the online return has confused us as they seem to imply that not claiming expenses when receiving property allowance applies to specific expenses. The guidance notes for "Property repairs and maintenance" and "Costs of services provided, including wages" states these expenses cannot be deducted if the property allowance is claimed. This part is clear. The guidance notes for "Rent, rates, insurance, ground rents etc" and "Other allowable property expenses" DO NOT state that these expenses cannot be deducted if the property allowance is claimed. This part is unclear in the context of the advice received above. The guidance notes are found in 2022/23 Self Assessment tax return > "4. Fill in your return" > "Expenses for other property income". "Note: Do not complete if you claim the property income allowance, you cannot deduct any allowable expenses or claim any other allowances on this income." is stated in the following guidance notes: * "Help about: UK Property 27 - Property Repairs and Maintenance" for the "Property repairs and maintenance" field. * "Help about: UK Property 30 - Costs of services provided, including wages" for the "Costs of services provided, including wages" field. And these guidance notes for the following expenses does not mention not deducting if the property income allowance is claimed: * "Help about: UK Property 26 - Rent, rates, insurance, ground rents etc" for the "Rent, rates, insurance, ground rents etc" field. * "Help about: UK Property 31 - Other Allowable property expenses" for the "Other allowable property expenses" (e.g. property inspection travel cost) field. Hence, we understand we should not deduct repairs and maintenance but we're confused whether or not to enter the building insurance, ground rent and property inspection travel expenses if claiming the property allowance. (In other words, is the property allowance only a substitute for repairs, maintenance and services or all expenses including insurance, etc). 4. With regards to categorising the expenses, could we check payment to locksmith would go under 'Property repairs and maintenance' (if expenses are claimed instead of property allowance)? For context, we paid locksmith to replace keys and lock, which the tenant reimbursed as they had lost the keys. So it's both a cost and income of the equal amount, i.e. the expense cancels out. We've included the reimbursement in the income (assuming anything received goes under income). We believe expense be classified as 'Property repairs and maintenance', not 'Other allowable property expenses'. Looking forward to your guidance and clarification on the above points. Thank you. Regards 

Hi N S,
Thank you for your question.
I can confirm that if you elect to claim the £1000 Property Allowance (and your rental income is more than £1000) then you cannot also claim any deduction for your rental property expenses.
You can either claim the £1000 allowance or the actual expenses incurred.
Please refer to the following guidance (under the section headed 'Allowances') for further information :  
Work out your rental income when you let property
This refers to all types of expenses incurred including property repairs and maintenance and such things as building insurance,ground rent,property inspections and travel expenses.
If you elected to claim the actual property expenses you could enter the payments to a locksmith under Property repairs and maintainance or in the 'Other Allowable expenses' box on the return.
You will need to retain receipts for any expenses incurred in case they are requested by HMRC in the future.
Thank you
   
                                                                                                                                            

Dear HMRC Admin 25 Thank you for confirming that all categories of expenses are non-deductible if opting to claim the £1,000 Property Allowance. Thank you also for clarifying that the locksmith expense can go in either 'Property repairs and maintainance' or 'Other Allowable expenses' (if opting to claim expenses instead of the property allowance). We've saved all receipts. The above answers my last two questions (3 & 4). Somehow all the paragraph/line breaks disappeared from my previous post, so apologise for the reading difficulty. We'll assume we need to wait for the helpline to re-open to request self-assessment for previous year for mother (question 1) and to withdraw this year's return for son (question 2). Regards N & C

Hi NS,

Yes, you will need to wait for the SA helpline to re-open.
The helpline closed on 12 June for approx. 3 months.

Thank you.

Thank you, HMRC Admin 20. Regards N & C