Shanaya bought a house in January 2020 which she rented out furnished to students from 1 June 2020. She charged rent of £600 per month, payable in advance. In August 2020, she paid £900 for the windows in the house to be repainted, and £500 for replacement carpets. What is the property business profit for Shanaya for the tax year 2020/21?
A £4,600
B £5,200
C £6,100
D £5,700
According to the exam kit the correct answer is B based on 11 months but I believe there is an error and the correct answer should be A because aren't we suppose to calculate to the nearest full month that is march? So 10 months rent in total?
Clarification needed property rental question.
Firstly, why are you working out tax for 20/21 when you should be dealing with anything tax related for 21/22.
If you plan to take an exam soon then this is the tax year you need to deal with.
Secondly, where did you get the question from?
I got this question from the kaplan study text for 20/21 year.
Yes I am appearing for December 2022 session I.e 21/22 tax year. The principles are the same for both tax years as regards to this question right?
So please tell me am I correct is there a error?
If not mentioned otherwise, we would assume it is cash basis, i.e, cash received will be recorded irrespective of the period it relates to. As the rent is paid in advance and tax year end is 5th April, we would record the payment of 11 months rather than 10.
The principles are the same but all the rates and many of the rules have changed over the years and using an old text book will not fully prepare you for the exam.
If it doesn't mention it - then use cash basis - yes
And I agree its 10 months not 11
@JillyB if we assume it as a cash basis because the question didn't mention it otherwise then it should be 11 rather than 10 months right?
As @sidhumoosewala295 said above.
Yes if cash basis