3.5.1 Who is affected? Who is not affected? What property finance costs are caught by the new rules?

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1 Contents 1 Introduction Is it property investment or property trading? Introduction What is the difference in tax treatment? Factors that indicate you are trading Subject matter The way in which an asset is acquired and held Frequency of transactions Length of ownership Supplementary work Profit motive and circumstances surrounding the sale How to avoid being taxed as a property trader Example Example How is property income taxed? Property income or trading income? When is property income taxed as trading income? What s the effect of taxing rental income as trading income? How is property income assessed to tax? Tax treatment of losses Losses for property business run by an individual or partnership Sideways loss relief What expenses can I claim? Advertising Unpaid rent Maintenance Buildings and contents insurance Interest paid - hire purchase, loans and overdrafts Fees associated with securing the loan Landlord s office costs Travelling expenses Salary costs Repairs and renewals The new rules for loan interest relief... 17

2 3.5.1 Who is affected? Who is not affected? What property finance costs are caught by the new rules? How does the restriction work? Withdrawal of tax relief for finance costs Capital Expenditure on your property Introduction Commercial property Enhanced capital allowances energy saving plant: Residential property New replacement furniture relief Your private residence and tax relief What is a residence? Permitted buildings, garden and grounds Building on your grounds When am I treated as occupying a main residence? Permitted periods of absence Election for more than one residence What is the time limit for submitting the election? Are there any circumstances when HMRC can challenge an election? Where there are two properties and no election has been made How are Non-UK residents with UK property and UK-residents with non-uk property taxed? Property developers Other situations Rental and lettings Business use Dependent Relative Relief Trusts and trustees Delay in occupation Conversion of a property Married couples and main residence relief Transfers of property between couple (in life or on death) Divorce and PRR Furnished Holiday Lettings Introduction... 44

3 6.2 How does a property qualify? When to apply the test Occupancy elections Income & Corporation tax treatment Private use Losses Capital Gains and Inheritance Tax issues Inheritance Tax and Business Property Relief (BPR) Additional services Property maintenance and repairs Rates Capital Gains Tax Running a FHL via a company What happens on loss of FHL status? Capital allowances Losses CGT main residence and letting relief Joint property, partnership profit sharing ratios and FHL VAT issues Mixed rate supplies and furnished holiday lettings FHL overseas landlords Holding property personally or via a limited company? Introduction New business Incorporating an existing business? Advantages of holding property in a company Including the family in a property investment company Tax considerations on transfer to a limited company Are there any advantages in selling the property to a company? ATED CGT: UK residential property & non- natural persons Introduction Compliance Current year Earlier years What is the value of property that is subject to ATED Who is regarded as a Non-Natural Person?... 61

4 8.5 How much is the ATED charge? How is property valued? ATED when moving house or for a new build New and improved properties Pre-return banding checks (PRBC) De-enveloping Reliefs and Relief Declaration Return Exemptions ATED penalties VAT on land and property Introduction What is a supply of property? Is property rental subject to VAT? Residential property Commercial land and buildings Non-commercial land and buildings Miscellaneous land transactions What is the option to tax? Can this option lapse within 20 years? Other situations where VAT has an impact Stamp Duty Land Tax & residential property - the higher rate Overview Determining what is the main residence Replacing the main residence Special situations So what are the additional SDLT rates? What is exempt from the higher SDLT charge? When the higher SDLT charge may not apply Other situations where the higher rate of SDLT may apply Examples: Property and letting other tax issues Introduction Income tax EIS, SEIS and EMI Capital Gains Tax Rent-a-room relief... 79

5 What are the conditions? Rent a room - alternative treatments Non-resident Landlords NRLS - Agent NRLS no Agent Compliance Making Tax Digital (MTD) An Overview Major changes Quarterly Reporting Improved taxpayer portal Benefits of MTD Timescale Exemption threshold... 85