The Lemon Fool

Hi All

Wasn't sure were this would fit.

I became a landlord in 2011 after having to leave my employed job due to health issues. I have 5 properties (3 HMO's) which are all in my personal name. I do have agents handling the admin side for the HMO's but i am involved in doing maintenance etc . I have opened a SIPP in 2016 but am limited to £2880 a year . Anything more wont get tax relief apparently. Are any other people in this situation and is there anything that can be done to make the earnings form my properties count as relevant income for tax relief purposes. Or is it just suck it up and nothing can be done?

Thanks

Raj

Just off the top of my head, but might you form a limited company to own the property? If you were then the sole director, the remuneration that you took would be earned income.

TJH

As i understand i would need to transfer the properties , ie effectively sell them to the newly formed limited company and this would trigger both CGT and Stamp Duty Fees. Although i have heard that if properties are held in a partnership for x amound of years there maybe be some way to hold the CGT on transfer

This post on the HMRC Community Forums (where HMRC themselves answer questions) implies that if you declared yourself self-employed with the property business as your trade then you could count profits as relevant earnings.

However, this post says that "Rental income is not normally a business" and gives a link to https://www.gov.uk/working-for-yourself

But then the taxpayer points to https://www.gov.uk/renting-out-a-property/paying-tax for when it does count as running a business (note the last condition there "you’re buying new properties to rent out")

To which HMRC responds that section 268 of the Income Tax (Trading and Other Income) Act 2005 "charges tax on rental income as property income since 6 April 2005, even if it could properly be regarded as a trade receipt" and gives a link to https://www.gov.uk/guidance/income-tax-when-you-rent-out-a-property-working-out-your-rental-income

So, not very clear really ... except that if you google on the matter there are masses of results that say that rental income isn't relevant earnings but no results, that I can see at least, that give a workaround for that, which would indicate that you'll probably just have to "suck it up and nothing can be done".....

The norm is property rental may be a business but is not a trade (if not then class IV would likely apply). See Elizabeth Moyes Ramsey case re s162 incorporation relief of a property business.

https://assets.publishing.service.gov.u ... v_HMRC.pdf

Whilst business and trade may sound similar from a tax perspective they are different.