Hallmarks of a property rental BUSINESSMake Text Bigger
If you are hoping to incorporate your rental property portfolio you will probably want to be certain that you can roll capital gains in your properties into shares in the company you are incorporating into. To achieve this you will need to qualify for relief under s162 TCGA 1992. The main qualifying criteria for this relief is that HMRC accept that you are running a business.
How many of these questions would you feel comfortable answering if an HMRC inspector was interviewing you to establish whether or not you are running a business:-
What is your business name?
Does your business have its own Unique Tax Reference number “UTR”?
Do you have a bank account in your business name?
Do you have business letterheads?
Do you have a business telephone number?
Does your business have a website?
Do you have a business email address?
Does your business have an office?
Do you have business cards?
Does your business have any employees?
Does your business have a balance sheet produced regularly?
Does your business produce management accounts?
You don’t have to have all of these things in place to qualify for incorporation relief but if you have none of them HMRC are more likely to consider that you are curating an investment portfolio than running a property rental business.
I’m not saying they are right but perceptions could prove to be important if you are hoping to incorporate your rental property portfolio and claim incorporation relief to roll capital gains in your properties into shares in the company you are incorporating into.
If you are considering incorporation or you need guidance on the optimal tax structure for your business please click on the button below.Show Book a Tax Planning Consultation
Landlord Tax Planning Consultancy is the core business activity of Property118 Limited (in association with Cotswold Barristers).
There will never be an optimal ‘one-size-fits-all’ business structure for tax purposes. The presentation below provides a useful overview of some of the options you might like to discuss with us.