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The above question passed through my head
I think with having a number of properties I have become a Business owner
I know it feels to me as I do run a Business and I forget It was once a InvestmentSo what are you - Investor of Business owner ?
My own assumption is BTL is properly the only investment that can become a hands on business
As I have never sold a Property, I really don't think of its capital value (it's just a figure on a spread sheet which I can't spend unless I sell).
Learn Change and Adapt ?????
All comments are for casual information purposes only. If you wish to rely on any advice I have given please ensure you obtain independent specialist advice from a third party. No liability is accepted for comments made.
Well I am told that I am an investor according to the tax department .
But my bank tells me I run a business so they can charge me money .
I have had the same conversation myself
Environment Agency treat us as a business
HMRC - it’s an investment
Both govt departments!
Although I accept that others will view me as both an investor and a business, I don't consider myself either. My interest in property is little more than a hobby. I've invested some time and some money in something I enjoy and I have to be aware of certain rules. I receive an income from property but I also make a small profit on my hobbies so even financially its hard to differentiate.
Maybe the term 'cottage industry' covers all aspects.
I feel i run a business, I do everything aside from finding tenants ( that may well change) and certification ( gas, electric, fire alarms).which i’mmnot qualified to do.
i converted one block and built the other. Whilst for 15 years it was another string to my bow its now my sole income. Difficult to justify its an investment but hmrc do.
This is what tax law says - and it hinged upon Ramsey proving that she was undertaking a minimum of 20 hours per week in running her property letting 'business'.
What constitutes a ‘business’?
The problem is that there is no statutory definition of the term for CGT (or income tax) purposes. As a result, in Ramsay v HMRC (2012), the First-Tier Tribunal judges were asked to consider the position.
The Tribunal had to consider whether the taxpayer’s activities in connection with the letting and administration of the property simply amounted to the passive receipt of rent (ie an investment activity) or whether those activities were sufficient to constitute a business. The Tribunal decided that the activities carried out by R were ‘normal and incidental to the owning of an investment property’ and arose out of necessity for the landlord of a property let out as flats.
In the event, R appealed against the First-Tier Tribunal’s judgment and the Upper Tribunal has recently found in her favour. Crucially in Ramsay v HMRC (2013), it was confirmed that the word ‘business’ should be afforded a broad meaning for CGT purposes. The judge concluded that R was carrying on a business.
That is only part of what the law says. There are statutory definitions of business but they only cover parts of the tax law. They are not all the same, for example there is the definition used for VAT that came from the EU. Of course that one does not affect many of us. The Ramsay case concerned incor[poration relief and found as you described, but that does not affect those parts of the tax code where there is a statutory definition. Seemingly as a consequence of that case HMRC decided that landlords should have to pay NI, but the law was changed so that only businesses that ar trade profession of vocation need do. HMRC then came up with a definition of business applying only to landlords which determines whether we can optionally pay class 2 contributions, That is similar but not identical to what was said in the Ramsay case.
In short according to HMRC what I do is a business, is not a business, is an investment and is an investment business all at the same time.
I once considered myself an investor in a cottage industry but today I feel that if I was purely an investor I could sit back and watch my investment from afar .
With constant new legislation and the increasing need for day to day involvement , business decisions that I alone must make have changed my mind.
Perhaps at least portfolio landlords should receive the recognition of businesses .
This question should be debated in HOL/HOC - as until say 3 yrs ago HMRC said all private landlords were running a business - with all allowable costs (incl all loan interest) being tax offsets as per all businesses.
Tesco may have a frequent habit of investing in more stores to increase overall profit - but they are still classed as a business.
Sorry, what's HOL/HOC please?
Houses of Commons/Lords.