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Dear Sir,
Thank you for you lectures.
Could you please help with the question below:
Ronald commenced self employment on 1st January 2017. He prepares accounts on 30 April each year.
On 1 December 2017 the property was let to a tenant, with Ronald receiving a premium of 12,000 for the grant of a 30 year lease. The monthly rent is 960 payable in advance and during the period 1st December 2017 to 5 April 2018 Ronald received 5 rental payments.What is number of rental payments that we should include in the calculation of the property income for 2017/2018?
BPP answer is: 960×4=3840
But as I understand for the second year we have first 12 months of profits as assessment base thus 1st January 2017 – 31 December 2017, so shouldn’t we take only one month of rent into account (for December 2017 only).
Thank you in advance.
From the information you have supplied there are two separate sources of income to deal with – his trading income assessment that you refer to and property income which is a separate source of income and not a part of trading income!
Property income is assessed as rental income accrued during the tax year plus the income element of the premium received
Therefore for the rental income part it will be 4 months of rent from 1st December to the end of the tax year – the amounts received are also irrelevant!
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