Neil Barlow FCCA ATT

Registered with Property118.com
Monday 1st July 2013


Latest Comments

Total Number of Property118 Comments: 26
Avoid CGT by adding spouse to deeds?

Hi Mark,

The existing CGT rules enable spouses to plan in advance and make transfers of assets (including property) from one to another at no-gain/no-loss for CGT purposes, before subsequently disposing of the asset. This allows another annual exemption against the gain and hopefully taxing some of it at the lower CGT rate of 18% if your spouse is a lower rate taxpayer in the tax year in which the disposal is made.

Although it is not illegal to transfer property in this way, we have come across occasions when the mortgage company have not allowed the transfer to take place. In these cases a declaration of trust has been used.

We would always recommend that the property is transferred into joint names at least a few months before it is put on the market (the longer the better). Transfers immediately prior to a sale could be looked at closely by the Revenue as they can challenge the transfer as being artificial and charge the tax on the spouse that did the transfer.

Neil... Read More

Are mortgage arrangement fees off-settable against tax?

Reply to the comment left by "Mark Alexander" at "14/08/2014 - 11:29":

Hi Mark,

Legal fees for the purchase of the property are capital. However, we have come across one solicitor who was happy to split his fee between the conveyance (therefore capital) and dealing with the finance (therefore revenue).... Read More

Are mortgage arrangement fees off-settable against tax?

Hi Mark and Ian,

All finance costs incurred in respect of the purchase of a buy to let rental property are an allowable revenue deduction. This includes the arrangement fees and broker costs etc.

Accounting standards allow a claim for the full revenue deduction in the year the arrangement fees are incurred (rather than spreading over the life of the mortgage) provided that the fees are not significant when compared to the interest charged over the life of the mortgage. It is therefore not normally necessary to spread the revenue deduction for the arrangement fees.... Read More

Property held in companies - ATED tax

The ATED applies to residential properties that are physically located in the UK. Unfortunately this catches buy to let residential properties held by companies and partnerships with a corporate partner.... Read More

Do landlords have to pay class 2 National Insurance?

Hi Sophie,

Although there is no definitive guidance from HMRC we have never come across HMRC chasing for Class 2 NIC in respect of a buy to let portfolio. I haven’t had time to read through all of the comments but I assume that your husband is employed rather than self employed, that he hasn’t completed any forms advising HMRC that he is self employed and that he completes the Land & Property pages of the tax return in respect of his buy to let portfolio.

Here are some brief notes which may help you deal with HMRC:

Class 2 NIC is due where an individual is categorised as a self-employed earner (s11 SSCBA 1992). A self-employed earner is someone who is ‘…gainfully employed in Great Britain otherwise than in employed earners’ employment…’(s1(b) SSCBA 1992).

S122 SSCBA 1992 defines ‘employment’ as ‘…including any trade, business, profession, office or vocation and “employed” has a corresponding meaning’, so it appears that if a portfolio of properties constitutes a business, Class 2 is due.
Therefore, the question boils down to whether a business is being carried on.

This was addressed in Rashid v Garcia (SpC 348), where the taxpayer argued that Class 2 was due on rental income (they were trying to claim some benefits). The taxpayer owned four let properties, including both residential and commercial lets, one of which was let to DSS tenants for lets of only a few weeks at a time. It was estimated that the taxpayer spent two to four hours a week and members of his family acting on his behalf spent 16 to 24 hours a week.

The Commissioner considered that there was insufficient activity for this to constitute a business and stated that:

‘…it is an investment which by its nature requires some activity to maintain it, rather than a business’.... Read More