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bigduckontax
bigduckontax, Accountant
Category: Tax
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My partner and I are self employed and do self assessment

Customer Question

Hi, My partner and I are self employed and do self assessment online, has always been straight forward (hes electrician, I work with horses) However as work was quiet about 14 months ago my father lent me some money to help purchase a property to renovate and run as a holiday let. The property is still being renovated and we work on it when ever we do not have other work. Can the expenses we have incurred be put down as business outgoings for us? DO we need to register the property as a separate business?
Any help would be great
Many thanks
Terri
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Terri, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Unfortunately these outgoings can only be offset against holiday letting income. Here is an extract from the Gov UK guidance on this matter: 'You can’t set the losses of one FHL business against the profits of the other if you have a UK and an EEA business.' You should read this advice most carefully as it sets out the limitations to furnished holiday lettings businesses: https://www.gov.uk/government/publications/furnished-holiday-lettings-hs253-self-assessment-helpsheet/hs253-furnished-holiday-lettings-2015 I do hope that I have been able to shed some light on your proposals.
Customer: replied 1 year ago.
Hi thanks for the reply, does it make any difference if the property is going to be sold on completion? In truth we haven't decided what to do with it so if it is in our favour to sell once complete we would do that.
Expert:  bigduckontax replied 1 year ago.
This does make a difference. I assume that this property is not your sole or main domestic residence. That being the case you will be subject to Capital Gains Tax (CGT) on disposal. The gain is the difference between the acquisition and the disposal price. The acquisition price is the purchase cost plus purchase cost including Stamp Duty Land Tax plus improvements eg installation of double glazing, central heating extensions etc, but not routine maintenance. The disposal price is the selling price less costs of sale. The difference is the gain which as it is jointly owned should be divided by two and from each individuals' proportion should be deducted their Annual Exempt Amount of 11.1K. The remaining sum is taxable at 18% or 28% depending on the individuals' income including the gain in the tax year of disposal.
There is, however, a danger that HMRC will classify your activities as trading in land in which case the gain will be classed as income liable to Income Tax (IT) at your marginal rate of tax. In that case your entire refurbishment expenditure could be offset against a gain taxed as income.
I do hope that my reply has been of assistance.

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