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  • Tax

    Tax treatment of property businesses

    Are you a property investment business or a property trading business? An investment business is treated very differently from a trading business in terms of taxation. Given the problems s24 has caused landlords it is no surprise that being treated as a trading business is seen by some as being the panacea that makes all the s24 problems go away.

    Unfortunately it is not up to us to decide what type of business we are. If you predominately let properties you are an investment business not a trading business. You will be viewed by HMRC as an investment business. If you arrange your affairs to be taxed as a trading business when you are an investment business you are asking for serious trouble. You may think you’ve sorted out your s24 problem and you may well have done for the immediate future. Long term (possibly years) you are very likely to incur the wrath of HMRC with all that entails.

    So to summarise. Please be aware of what type of business you are. If you are a lettings business then you are an investment business and should not arrange your tax affairs as though you are a trading business. It would only be a matter of time before you got found out.

    EDIT: My post relates to straightforward buy to let properties, not furnished holiday or serviced accommodation properties.
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    I'm not sure this is as clear cut as you suggest.

    Residential letting is an investment business but holiday letting is a trading business. I'm not sure how serviced accommodation letting is defined as it would include the hotel industry, serviced apartments and short term letting?

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    A good teacher must know the rules; a good pupil, the exceptions.

    Martin H. Fischer


    Just to clarify I’m talking about straightforward buy to let properties. Your points are well made.
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