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  • Tax

    Does S24 apply to land?

    Is anyone aware as to whether S24 will apply to land that is rented out? Equestrian land is hard to come by and rents can be high. I'm considering purchasing some and wondered if S24 will still apply. Will it end up that all income will be considered profit or will it be treated as any other business and I'll be able to claim mortgage interest relief?

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    Your question is probably irrelevant because i doubt you will be able to raise a mortgage on equestrian land

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    I am fairly certain I can get a mortgage on equestrian land because I know others that have and therefore appropriate brokers. In addition I could remortgage my residence (probably a more favourable rate) which I could claim the additional mortgage cost instead.

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    I reckon you will be running a commercial business as opposed to a residential dwelling business so i doubt s24 will affect you

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    Ok that makes sense although throws up a whole host of other questions needing answers. Thanks

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    S24 only applies to Residential Property which is rented out as living accommodation by an individual or individuals.  It does not apply to commercial property or the rental of land by an individual or individuals.  Assuming this is your only property investment then you will be able to reclaim the interest against the rental of the land.  However if you also have some Residential Properties that you own and rent out as accommodation then the mortgage interest will be deemed to relate to the whole portfolio and part of the interest will then be caught under s24.

    Regards

    Nigel

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    Nigel Reynolds FCCA CMgr FCMI

    Property Tax Specialist

    Reynolds and Co

    http://www.reynoldsandco.co.uk


    Hi Nigel,

    'However if you also have some Residential Properties that you own and rent out as accommodation then the mortgage interest will be deemed to relate to the whole portfolio and part of the interest will then be caught under s24.'

    What is your authority for that as my accountants say interest is apportioned between residential and commercial?

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    Firstly am an Accountant and Property Tax Specialist.  Secondly the authority for my statement is in two parts.  The first part is Income Tax (Trading and Other Income) Act 2005 s 272b whilst the second is an excellent article which was published in Taxation Magazine on 2 September 2018 and was written by David Wiscombe.  In the Taxation Article there is an excellent example entitled George which outlines that where there is a mixed portfolio then the interest has to be allocated across the portfolio in accordance with s272b which requires that split to be on " a just and equitable apportionment" it does not matter which property or properties the loan is secured upon,

    Regards Nigel

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    Nigel Reynolds FCCA CMgr FCMI

    Property Tax Specialist

    Reynolds and Co

    http://www.reynoldsandco.co.uk


    I have one resi BTL which has it's own BTL mortgage which would be bigger than any loan for the land. Not really sure how it would be apportioned now.

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    Slightly off subject and I probably dont need to tell you this but make sure you have a water supply, its very heavy and horses need loads of it....

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    I have 6 horses so I'm painfully aware of how much water they need (frozen pipes anyone?) I'm good with knowing the ideal set up but just need to be sure of costs/tax etc.


    Thanks

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