Split year treatment and foreign rental income and expenses on cash basis

Hi HMRC admin, I am from Hong Kong. I assessed myself to be qualified for split year treatment in the tax year 2022/23. The UK part of the tax year starts from 1 September 2022. I am trying to complete my Self Assessment tax return for the tax year 2022/23. My understanding is that my income on and before 31 August 2022 (HK part of tax year) is not taxable in UK and no need to report in the Self Assessment. I only have to report my income from 1 September 2022 to 5 April 2023 (UK part of tax year) in the Self Assessment. I have the following questions. Q1. I rent out my Hong Kong property and receive a monthly rental of £1,400 in advance. For the rent covering the calendar month from 28/8/2022 to 27/9/2022 in the sum of £1,400, I received it on 3 August 2022. I apportioned it into 2 parts: 1. 28/8/2022 to 31/8/2022 (i.e. £1,400 x 3/30= £140), not taxable in the UK and no need to report in Self Assessment 2. 1/9/2022 to 27/9/2022 (i.e. £1,400 x 27/30= £1,260), taxable in the UK and I am going to report in Self Assessment. However, if I use cash basis, do I still need to report the sum of £1,260 when I received it on 3 August 2022 which date does not fall into the UK part of the tax year? Or for the split year treatment, first receipt date is irrelevant? Or traditional accounting should be used? Please advise me the correct way to report this receipt. Q2. For the rent covering the calendar month from 28/3/2023 to 27/4/2023 in the sum of £1,400, I received it on 28 March 2023. I apportioned it into 2 parts: 1. 28/3/2023 to 5/4/2023 (i.e. £1,400 x 9/31= £406.45) 2. 6/4/2023 to 27/4/2023 (i.e. £1,400 x 22/31= £993.55) If I use cash basis, should I report the entire sum of £1,400 in the UK part of the tax year 2022/2023 because the receipt date falls in the tax year 2022/2023? Or should I report £406.45 in the tax year 2022/2023 and report £993.55 in the tax year 2023/2024? Or traditional accounting should be used? Please advise me the correct way to report this receipt. Q3. Fire insurance expense in the sum of £365 was paid on 7/6/2022 for the said Hong Kong property. The insurance covered the period from 20/6/2022-19/6/2023. The property was rented out from 28/6/2022. Before renting out, it was my home. I apportioned the said sum into 3 parts: 1. 20/6/2022 to 31/8/202 (i.e. £365 x 73/365= £73), falls in the HK part of the tax year and no need to report in Self Assessment 2. 1/9/2022 to 5/4/2023 (i.e. £365 x 217/365= £217) 3. 6/4/2023 to 19/6/2023 (i.e. £365 x 75/365= £75) Similar to Q1, if I use cash basis, should I still report both amounts of £217 and £75 in Self Assessment when I made payment on 7 June 2022 which date does not fall in the UK part of the tax year 2022/23? Or for the split year treatment, first payment date is irrelevant? Or should I report both £217 and £75 in the tax year 2022/23? Or should I report £217 in the tax year 2022/23 and report £75 in the tax year 2023/24? Or traditional accounting should be used? Please advise me the correct way to report this receipt. Q4. Likewise, should all allowable expenses related to the property be reported similarly to your answer to Q3? Q5. Likewise, should the residential property finance costs be reported similarly to your answer to Q3? Q6. My Hong Kong property is a flat. It is in a building comprised of 50 flats. The building manager (i.e. a company) is responsible for the repair, maintenance, security guard, cleaning, rubbish disposal, etc of the whole building and charges a monthly management fee to each flat. Would you please advise if this monthly management fee is an allowable property expense? Many thanks.

Hi,

As claiming split year, you will only report foreign income for the UK part of the year. HMRC cannot advise you on wether to use cash basis or traditional accounting for your rental income as this is your choice.

This will however, effect how to report the income received. see guidance at:

Work out your rental income when you let property

For the fire insurance, as this was paid as a lump sum prior to arrival and when you were living in the property, this cannot be claimed in 2022 to 2023.

Thank you.

Hi HMRC Admin 32, Thank you for your response. I totally understand that it is my choice whether to use cash basis or traditional accounting. However, I would be obliged if you could provide me with the related information so that I can make my own decision. I read from the Foreign notes (for Form SA106) about Box 19 Private use adjustment, which said that "If you put any amounts in box 17 that were not solely for the property business, put the private (non-business) proportion in box 19. For example, if you include the cost of insuring the property for a year in box 17, and you only let it for 8 months, put the 4 months non-business cost in box 19." Based on the aforesaid information, does it mean that even I have lived in the property (private use), I can claim the fire insurance as allowable expenses with private use adjustment? I understand that, when traditional accounting is used, "the date of payment" is irrelevant. It matters that the lump sum (at least a part of it ) was actually paid for the rented-out property. As such, although the lump sum was paid prior to arrival, it can be claimed in the UK part of tax year 2022 to 2023. Is that correct? Would you please also answer my question Q6 which I repeat here? My Hong Kong property is a flat. It is within a building comprised of 50 flats. The building manager (i.e. a company) is responsible for the repair, maintenance, security guard, cleaning, rubbish disposal, etc of the whole building and charges a monthly management fee to each flat. Would you please advise if this monthly management fee is an allowable property expense? I am desperate for your answers. Many thanks.

Hi jess810

Cash basis records money when it actually comes in and goes out of your business, while traditional accounting records income and expenses when you invoice your customers or receive a bill. Yes the monthly management fee would be an allowable expense for when the property is rented out. The accounting basis will also determine what you can claim.

Thank you