tax rate for my rental business

[Nick_Grantley]

Hi - I have a ltd company (owned by me and my wife) that owns a few flats and are rented out to unconnected persons. For years now I have prepared tax returns thinking I am a close investment company and therefore paying the higher corp tax rate.

On preparing my return for 2011 I have re-read the definition and now query my initial assessment of being a "close investment holding co".

Can anyone confirm ?

Is it easy in this years tax return to offset the over-payments I would have made from past years on the self assessment form or is such retrospective adjustment frowded upon by HMRC ?

Many thanks
Nick

[wamstax]

Hi there - Yes you are correct A company will not be a close investment-holding company if throughout the accounting period it exists wholly or mainly for the purpose of investing in land or interests in land (including buildings) where the land is, or is intended to be, let.

But a company will not qualify for exclusion under Section 34 (3) if the land etc is let, or intended to be let, to a person who is connected with the relevant company.

'Connected' has the meaning given by CTA2010/S1122. That is, under Section 1122 (2), a company is connected with another company:

a.if the same person has control of both, or a person has control of one and persons connected with him, or he and persons connected with him, have control of the other, or
b.if a group of two or more persons has control of each company, and the groups either consist of the same persons or could be regarded as consisting of the same persons by treating (in one or more cases) a member of either group as replaced by a person with whom he is connected.

I am afraid that you will have to make an application to HMRC for the amount overpaid in relation to previous years (but will be restricted to 4 years back). You would of course be able to file an amended return for any accounting period which was not older than 24 months automatically and make the amount automatically repayable and set off against your latest period taxes.