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Where Taxpayers and Advisers Meet

Residential Property Company

Charlie9462
Posts:1
Joined:Fri Apr 01, 2022 9:48 pm
Residential Property Company

Postby Charlie9462 » Fri Apr 01, 2022 9:53 pm

Hi all,

I have a residential property company which I use to purchase property through. I actively manage the properties (2 at the minute, soon to be 3). I also work a lot of hours looking for new deals etc.

My question is I am just doing my first year's tax return for the company. When I click through on HMRC it is asking me if the company is an investment company or not

Exert from HMRC website:
"We need to know if the company is:

an insurance company - not including independent insurance brokers
an investment company - the main business is buying assets like shares and financial securities
a credit union - the company operates like a bank and lends money
a commercial property management company - this is different to a flat management or Right to Manage company"

Now does a residential property company fall under 'investment company' above or not? And what is the difference between if I press yes or no. ie what changes in the way the company gets taxed?

I see it as a business as I plan to do a couple of property flips this year along with managing the portfolio but would be good to know how selecting investment vs trading business impacts the tax.

Thanks

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Residential Property Company

Postby bd6759 » Sat Apr 02, 2022 3:17 pm

If the activity at this moment is solely the receipt of rents, it is an investment company. (But not a close investment holding company which used to have adverse tax consequences).

The tax rates are the same whether it is an investment or a trading company. There are subtle nuances, but none that are material in small companies. So it really doesn’t matter.

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm

Re: Residential Property Company

Postby Incredulum » Mon Apr 11, 2022 5:52 pm

If you're doing flips then that's likely to be trading activity.

But it doesn't make much difference as to the outcome.


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