Landlord occasional resident in BTL?

by Readers Question

16:05 PM, 16th June 2014
About 4 years ago

Landlord occasional resident in BTL?

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Landlord occasional resident in BTL?

I have recently added a very spacious purpose-built two bedroom apartment to my portfolio. It is almost ready to let, just a few minor upgrades in progress. As I have this week taken on some extra self-employed work in the area of the property (in addition to my permanent job elsewhere) I am curious to know whether I can use the place once or twice a week by renting the larger of the two bedrooms (15x12ft), keeping the second for myself?

What sort of tenancy would I create? Landlord occasional resident in BTL

I’ve been through my mortgage with a fine tooth comb and it appears I am allowed holiday lets, corporate lets, LHA & Housing Association and to retain up to 40% of the property for use as a dwelling by myself or any other related person. Is this peculiar figure arrived at because I borrowed 60% of the purchase price? It won’t be my primary address and any lodger will surely be delighted to have the place to themselves for the majority of the time.

Seems too good (other than reduced rental income of course) to be true…!?

Thanks

Carla



Comments

Mark Alexander

16:08 PM, 16th June 2014
About 4 years ago

Hi Carla

As you say, it sounds too good to be true.

If you are married, perhaps you could make this your "permanent residence" and the marital home your husbands.

This would not prevent you staying with your husband or vice versa but would make you a resident landlord.

This would also enable you to rent to lodgers using licences and would also have a positive effect on your CGT position.
.

matchmade

17:33 PM, 16th June 2014
About 4 years ago

Mark, I don't think a married couple can have two permanent residences for tax purposes.

I have rented out a room in one of my HMOs to myself, or rather to a limited company I control, when I needed an office and somewhere for an occasional overnight stay in the area. I issued an AST to the company, which paid a market rent and its share of the utility bills. All of this can be deducted from company profits and even some VAT reclaimed if the company is VAT-registered.

I think you could also pay rent to yourself, as it were, if you are self-employed. The cost of a motel would be tax-deductible, so why not rent? You would of course have to declare the rent as investment income on your self-assessment return, so I don't think you're really gaining anything, unless you have accumulated losses on rental income to use up.

Contract - I don't think you need one - it's your flat so you are just living in it as allowed under the terms of your mortgage.

Mark Alexander

18:38 PM, 16th June 2014
About 4 years ago

Reply to the comment left by "Tony Atkins" at "16/06/2014 - 17:33":

Hi Tony

Re your comment; "I don’t think a married couple can have two permanent residences for tax purposes."

What if they are separated?

What is the legal definition of separated?
.

matchmade

9:26 AM, 17th June 2014
About 4 years ago

Hi Mark - I agree it's a grey area, and I don't think there is a legal definition of "separated" because it's so easily reversed in an on-again off-again relationship.

I have read some tax tribunal case law as regards the definition of principal private residence relief. In one case a husband moved out of the family home into a beaten-up property, did it up, sold it, and moved into a new property within a year to live with a new girlfriend. He tried to claim PPR on the renovated house, but HMRC denied this and said he was trading, because a) he hadn't lived there long enough, b) they believed he'd only renovated in order to make a profit and was secretly carrying on a new relationship and intending to move in with her all along, and c) his PPR continued to be at his wife's property because they were still married and the separation could easily have been reversed. In other words, his residence at the renovated property lacked the required degree of permanence, and this applied to his relationship and cohabitation arrangements as well as the length of time he lived in the house. The tribunal agreed with HMRC, so the husband had to pay income tax on his trading gains from the renovation, which must have been a painful tax bill to swallow.

Of course this was only one case and situations vary wildly. What if he had renovated and carried on living in the new house for five years, whilst having a renewed on-off relationship with his wife and a parallel relationship with his girlfriend? Could he claim PPR on his new house? I've no idea!

Mark Alexander

9:34 AM, 17th June 2014
About 4 years ago

Reply to the comment left by "Tony Atkins" at "17/06/2014 - 09:26":

Hi Tony

My understanding is that time is to a very great degree immeterial. What is more important is that the new PPR is used as the address for ALL correspondence, registration with doctors, dentists, DVLA, Utilities, Council Tax etc. etc. If that had been the case I suspect the person involved in the case to which you are referring would have had strong grounds for appeal.
.

Nicholas Wakefield

17:46 PM, 6th January 2015
About 4 years ago

I am a full time BTL investor with a 6 property portfolio in SW London. Unfortunately, this year I shall be separating from my wife, (she is not involved in my business), and I have found a property which would be perfect for me to move in to.

It seems that under a financial 'stress testing' exercise I shall not be sufficiently qualified to purchase this property under a residential mortgage and naturally I would be not able to purchase on a BTL loan and live there.

Finally, I am trying to release equity from my portfolio by remortgaging and equity release, (my LTVs are healthy-all under 50%), but still do not have the required funds to buy the property outright . Any advice please?

Neil Patterson

18:44 PM, 6th January 2015
About 4 years ago

Hi Nicholas,

It would be wrong to give any advice without knowing all your circumstances.

If you would like to email me npatterson@property118.com with a bit more info and contact details I will have the best consultant for your circumstances go through a full fact find with you and recommendations.


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