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Where Taxpayers and Advisers Meet

FHL - CT600 or Self Assesment?

TopBoon
Posts:2
Joined:Fri May 21, 2021 4:58 pm
FHL - CT600 or Self Assesment?

Postby TopBoon » Fri May 21, 2021 5:14 pm

Greetings,

I have established a LTD company to purchase a property, with the intention of operating a Furnished Holiday Let. This means I can claim capital allowances so that I can furnish the property to a decent standard and deduct the cost from pre-tax profits. Also, if the holiday lets do not work out then I have the option of BTL and I can still deduct mortgage interest and only pay corporation tax, rather than income tax.

As I understand it, if my net profit from renting the property exceeds £1k but is less £2.5k I would need to declare it by phone or in writing to HMRC. However, if the income is greater than £2.5k but less than £9,999 I need to declare this via a tax return.

My questions are:

1) If my profit is less than £2.5k, do I not need to submit either a Company Tax Return (CT600) or Sel Assessment Tax Return (SA100)? As a ltd company, I would have thought I need to submit something

2) If my profits exceed £2.5k, which form is relevant - CT600 or SA100. I would have thought it would be CT600 as I'm paying corporation tax rather than income tax. However, the Furnished Holiday Let section seems only to exist on the SA100 form.

I'm new to owning a business and find taxation extremely confusing, so any help would be gratefully received.

Thanks!

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: FHL - CT600 or Self Assesment?

Postby Lambs » Fri May 21, 2021 6:40 pm

T,

Your company will have a duty to file a CT return and account for any Corporation Tax due in any event.

The Property Allowance will not apply to you - certainly not in relation to this property - because you will not be receiving property income. Your company will be receiving property income (but companies do not get the "Property Allowance"). You will be in receipt of salary, dividends or similar if you decide to "take" the profits from the company to use personally/privately. If you do so decide, then you will need to notify HMRC if there is Income Tax to pay.

It may well be an idea to speak to an accountant or tax advisor, given the nature of your queries so far.

With regards,

Lambs

TopBoon
Posts:2
Joined:Fri May 21, 2021 4:58 pm

Re: FHL - CT600 or Self Assesment?

Postby TopBoon » Fri May 21, 2021 7:19 pm

Thanks for the reply. It's a curious one, as HMRC told me directly, via their HMRC Customer Support channel on Twitter that the property allowance would apply to me (I have no idea how accurate they are or how reliable the advice is meant to be there)

I'm still stumped as to the Furnished Holiday Let part. I understand that I may deduct capital allowances and show this on my return, but this section only exists on the self-assessment form. Also, I read that "If you should come to sell your FHL property, you are able to claim certain Capital Gains Tax (CGT) reliefs. These are unavailable to long-term rental properties and include:

Entrepreneur’s Relief
Roll-over Relief
Hold-over relief"

So I am keen to know if this applies to my situation as an SPV LTD company.

I would agree that specialist advice is probably required :-)

Lambs
Posts:1558
Joined:Wed Aug 06, 2008 3:15 pm

Re: FHL - CT600 or Self Assesment?

Postby Lambs » Fri May 21, 2021 11:24 pm

T,

You've either explained yourself to HMRC incorrectly, or you've simply been misinformed. The "Property Allowance" is an Income Tax measure, and does not apply to companies. If you personally want money out of that company, it will NOT be property income in your hands, so the "Property Allowance" will not apply thereto.

A company CAN hold an FHL and it WILL still be eligible for CAs. Something to bear in mind about FHLs is that they are typically expensive to buy / hard to keep hitting the FHL criteria. This is because they tend to have to be in tourist hotspots in order to have a reasonable chance of hitting the minimum short-term letting thresholds. It's not always the case, but I'd say it's typically the case.

Unclear why you're chasing reliefs that, if you'll forgive me, it seems unlikely that you (yet?) need. (I may have misunderstood, but it doesn't sound/read like you've got a gain you are looking to shelter, etc.)

Yes, speak to an advisor.

Regards,

Lambs


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