Rental property- offsetting losses

Losses incurred from renting property can be offset against rental profits in future periods but subject to a few criteria.

First of all the business has to be considered a “continuing business”. By “continuing business” it is understood that there are, from time to time, gaps in the rental periods due to tenant downtime or periods where repairs and renovation are necessary. As long as these periods do not exceed three years, this can be considered as “continuing business”. What this doesn’t include however, is if during the gaps in rental, the property is used as the tax payers main residence. This then results in the business being classed as “ceasing trading” after which losses cannot be offset against future profits.

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