IS PROPERTY LETTING A BUSINESS OR A TRADING ACTIVITY?

News: July 2013

IS PROPERTY LETTING A BUSINESS OR A TRADING ACTIVITY?

This is often a moot point, but following a recent tax tribunal decision (Elizabeth Moyne Ramsey v HMRC UKUT266) we now know that it is a business for the purposes of claiming CGT roll-over relief on incorporation of a property letting activity. That means no immediate tax charge on incorporation.

That could be very handy if it becomes a good idea to own a property letting portfolio within a limited company. The tribunal held that whether a business exists for this purpose should be interpreted broadly.

DO YOU LET PROPERTY FURNISHED OR UNFURNISHED?

This has always been an important distinction, as only furnished lettings entitle you to the valuable annual wear and tear allowance of 10% of the rents. Now it is definitely worth reviewing whether you could show the property is furnished given that the renewals basis for replacing items in commercial or residential properties let unfurnished ceased from 6 April 2013.

It has recently become apparent that it is not always too difficult to show that a property is let furnished. HMRC guidance is that a property is furnished if it includes some (but not necessarily all) items that a tenant or owner-occupier would normally provide in unfurnished accommodation. That vague statement is then amplified and indeed the 10% allowance should be claimable where the property contains sufficient furniture, furnishings and equipment for normal residential use.

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