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Where Taxpayers and Advisers Meet

Property rented out to a company

JP2005
Posts:9
Joined:Wed Aug 06, 2008 3:29 pm

Postby JP2005 » Thu Oct 13, 2005 7:09 am

Please could someone confirm whether or not the owner of a residential property that then leases it to a company that uses it for its serviced apartment trading business will benefit from business asset taper relief and rollover relief on any future disposal.
Thanks

Huw Williams
Posts:285
Joined:Wed Aug 06, 2008 2:18 pm

Postby Huw Williams » Thu Oct 13, 2005 9:23 am

I think the answer is NO.

I am not certain, but this sounds like a rental business and my undertstanding is that rental property is usually an investment asset and does not qualify for the higher taper or rollover relief.

If you have more than one property there may be a point at which it becomes a business and qualifies for the better reliefs.

Huw Williams
Nottingham

0115 914 6846

enquiries@huwwilliams.co.uk

Instinctive
Posts:1797
Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Thu Oct 13, 2005 10:23 am

I have not checked to see if there are any statements by the Inland Revenue in this respect. I recall some statements long time ago in respect of lettings by individuals and in which circumstances would they be deemed to have been carrying on a trade as opposed to a lettings business. May be further detailed research would be of assistance.

However, in view of only one property, it does not appear that your company would be operating like a hotel (but without supply of food) to make it a trade. Accordingly, I would tend to go along with the comments by Huw Williams above.

Ramnik

JP2005
Posts:9
Joined:Wed Aug 06, 2008 3:29 pm

Postby JP2005 » Fri Oct 14, 2005 5:08 am

Thanks for your replies

Just to clarify - the company in question leases 39 apartments in total from many individual property investors (that are unconnected to the company completely) and operates a bona fide serviced accommodation trade. My understanding was that if the property was used by the company as part of its trade then it would be treated as a business asset for CGT purposes.

Instinctive
Posts:1797
Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Fri Oct 14, 2005 10:43 am

In view of your further comments, I would agree that the company would be deemed to be operating a schedule D trade.

However, companies are not eligible for taper relief and they continue to enjoy (!) indexation allowance.

You will benefit from business asset taper relief on the sale of your shares.

Ramnik

Huw Williams
Posts:285
Joined:Wed Aug 06, 2008 2:18 pm

Postby Huw Williams » Fri Oct 14, 2005 12:14 pm

If I have understood it correctly, you are asking about the rental of one residential property to a company which uses it in its trade.

I think the question is whether renting it to the company is a trade, not whether the company is trading.

Is it your company? If it is then there may be more grounds for claiming the higher reliefs, but it would require a little more research.


Huw Williams

JP2005
Posts:9
Joined:Wed Aug 06, 2008 3:29 pm

Postby JP2005 » Mon Oct 17, 2005 2:34 am

Thanks for your advice
I am looking at it from the property owners point of view - the majority of which have no connection to the company that uses them to carry out its trade.
For an individual disposing their property i thought they would be entitled to business asset taper relief beacause:

a) the asset held is being used for the purposes of a trade carried on by a trading company
b) the company is unlisted
c) the rule whereby the individual had to be employed by the company no longer exists.

Or am i looking at this incorrectly??
Thanks

Huw Williams
Posts:285
Joined:Wed Aug 06, 2008 2:18 pm

Postby Huw Williams » Mon Oct 17, 2005 10:09 am

As I read the rules when an individual sells an asset, CGT rollover reliefs is only available if the individual is trading and the asset is used in the business.

Relief is extended if the asset is used by that individual's personal company (broadly one in which he holds 5%) or in which he works.

The business asset taper rules look very similar (although at first glance the need for a shareholder or other connection with the company is not obvious).

To look at the taper rules in more depth is, I think, beyond the scope of this forum.



Huw Williams


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