How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I have a client who went ahead and bought a but to let in a

Resolved Question:

Hi Keith
I have a client who went ahead and bought a but to let in a trading company. I have said he should have had a separate company as this may impact his ER relief one day and in addition need to keep separate accounts for property income etc . I have warned him that there could be (unlikely) repercussions re ER in the future as even with goodwill property will exceed 20% of assets. I do understand this can be argued with HMRC as "in the round" may not fall foul. What say you ?
Submitted: 8 months ago.
Category: Tax
Expert:  bigduckontax replied 8 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

I concur with your opinion that a separate company would be a more convenient and safer vehicle by isolating the buy to let from other possible risks. However, providing that the accounting for the buy to let can be clearly delineated, there should be no problem. Remember companies are not subject to the Capital Gains Tax (CGT) regime at all, any gains or losses merely passing through the company's trading account and exposed to Corporation Tax (CT) at 20%. The Chancellor has recently stated his intention to drop this rate to 15% at some time in the future. Thus ER will not come into the equation at all, see HMRC Helpsheet 275.

I do hope that you find my reply of assistance.

Customer: replied 8 months ago.
Thanks Keith
I am aware re CT for the company -my concern was that if the company ceases to trade or is sold then in order to get 100% ER for the client -we need to prove that the Rental income in not more that 20% of total company income and that property is not more than 20% of the company's total assets ?
You made no comment re this -assume you meant this as "one of the possible risks" you mention above?
Thanks
Blaine
Customer: replied 8 months ago.
Hi Keith
what about second half of question which I have restated above?
Thanks
Blaine
Expert:  bigduckontax replied 8 months ago.

I am at a total loss as to what you are getting at with this 20%; please elucidate.

Customer: replied 8 months ago.
Hi Keith
In terms of claiming 100% ER -should company be sold or wound -up,
the ER can be restricted if more than 20% of turnover /profit /assets is
from non-trading activity .
Kind regards
Blaine
Expert:  bigduckontax replied 8 months ago.

ER can only be claimed in general terms against a cessation of trading activity. The cash holdings if significant do not attract this relief. Application should be made in cases of genuine doubt as to trading status, to HMRC for non-statutory clearance on behalf of its shareholders. HMRC has published a checklist of information to be included in such clearance applications. The Gov UK guidelines can be found here:

http://webarchive.nationalarchives.gov.uk/+/http://www.hmrc.gov.uk/manuals/cg4manual/CG64100.htm

Customer: replied 8 months ago.
Okay Thanks ,Keith
Expert:  bigduckontax replied 8 months ago.

Delighted to have been of assistance.

Please be so kind as to rate me before you leave the Just Answer site.

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
bigduckontax and 2 other Tax Specialists are ready to help you
Expert:  bigduckontax replied 8 months ago.

Thank you for your support.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.com/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.com/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.com/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.com/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.com/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions