FHL business in company, property personally owned

by **Stevebl** on Thu Jul 21, 2011 7:01 pm

Does anybody know the implications of personally owning a property, whilst running a furnished holiday let via a company? I don't think there any issues with the company claiming deductions for fixtures and fitting and other expenses, but I'm not sure about loan interest if the loan is still in the names of the individual. This wouldn't seem to constitute a loan to a business as the proceeds of the loan haven't actually been loaned to the business. If the individual perhaps leased the property to the company and charged rent, could this be set off against the interest in the personal tax return? In the long term, on disposal of the business, entrepreneur's relief should come into play, but would the property be considered outside the scope of this relief if it is held outside the company which conducts the actual FHL business? Many thanks in advance.

by **section 44** on Thu Jul 21, 2011 7:08 pm

Stevebl wrote:If the individual perhaps leased the property to the company and charged rent, could this be set off against the interest in the personal tax return?

Provided all arm's length terms, the individual would be able to set teh interest against the rent received from the company.

by **Stevebl** on Thu Jul 21, 2011 7:11 pm

Thanks, that was quick! Presumably, without the lease, the interest can't get relieved against anything? Any ideas on the entrepreneur's relief query?

by **maths** on Thu Jul 21, 2011 8:56 pm

In principle ER should be available but, of course, all the relevant conditions would need to be satisfied at the time of disposal.

by **mullet** on Fri Jul 22, 2011 9:08 am

In the long term, on disposal of the business, entrepreneur's relief should come into play, but would the property be considered outside the scope of this relief if it is held outside the company which conducts the actual FHL business?

Remember that ER is available to individuals, not companies - but that fits with the circumstances since it is the individual who owns the asset. The disposal of the property would have to be an associated disposal and ER would therefore arise only if that disposal was linked to a material disposal of business assets. So there would have to be a withdrawal from the business (i.e. the company) by disposing of some or all of the shares.