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bigduckontax
bigduckontax, Accountant
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I am a small builder with 3 employees. As part of a pension

Customer Question

I am a small builder with 3 employees. As part of a pension scheme for my self I have bought a house as a buy to let. I have a mortgage on the house. I had hoped I could buy I through the books of the business, there by reducing my tax liability for that year. My accountant says this is not possible because house buying is section 8 tax scheme. Is there away I can buy a house as part of my business
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
I would suggest that you ask your accountant for a fuller and better explanation of the position. Sect 8 is in respect of tenancies by authorities involving increased rents for certain services. You are not an 'authority.'
If your business is operated as a limited company there is no problem at all, the company can buy the house and rent it out. If you buy it personally you will have to account for it as a separate income stream in your business account although overall it will be in your Income Tax computation. It might be far easier if you ran it as a stand alone activity outside your normal business. I assume that you did not buy it as part of a SIPP within a pension envelope.
I do hope I have helped throw some light on your problem. You must, however, take it up with your accountant to explain himself.
Customer: replied 2 years ago.
Thank you for your answer. What I am looking for is a way to off set the money I spend on the house against my tax. It seems strange to me that if I buy a machine, and then use it to generate an income I can claim that investment against my tax. I have bought a house to generate income, but that investment cannot be off set against tax.
Is there a way to off set the investment made buying the house against tax other than going limited ?
If so how do I go about it.?
If I am better off leaving it as a stand alone business can you explain why that is. Please don't reply saying I should talk to my accountant, if I could get the information out of him I wouldn't need a service like this.
Expert:  bigduckontax replied 2 years ago.

The reason I suggested a stand alone business is perfectly simple. Whilst you can operate two disparate business within the same envelope you are not permitted to mix profit and loss between them. By running a separate set of accounts any problems of this nature simply do not arise.

I agree, the capital allowance (CA) system is a nonsense, it's like something out of Alice in Wonderland. The answer is you can't, so there! Here is HMRC guidance regarding buildings acquired and let for residential purposes:

'Leased out dwelling property - restrictions

Note that if your business is an ordinary UK property business or an overseas property business you can't claim capital allowances for expenditure on plant or machinery (including those that are fixtures or integral features), for use within a dwelling house that you rent out. However, expenditure on plant or machinery for use within common parts of a building that contains more than one dwelling may qualify.'

A business property is quite another kettle of fish, but dwelling houses are not, for CA purposes, business properties. It would not matter if you acquired it through a company, the same CA restriction would apply. The only way the purchase price is offset is on the sale of the property when it, plus improvements, is allowable in the Capital Gains Tax computation. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes.

Sorry to have to rain on your parade. Please be so kind as to rate me before you leave the Just Answer site.

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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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