The National Residential Landlords Association (NRLA) has warned landlords who have incorporated their property portfolios that they will have to prove they spend 20 hours a week managing their businesses to qualify for tax reliefs they may have claimed.
Thousands of landlords have switched their properties from being owned personally to a limited company to benefit from more generous tax reliefs including mortgage interest payments. Most will also have claimed Incorporation Relief to avoid paying capital gains tax on incorporation.
HMRC has sent out letters warning landlords that to qualify for the relief you have to demonstrate that you spend at least 20 hours a week managing the business. If this can’t be demonstrated, then HMRC warns landlords that they may have to pay higher corporation or capital gains tax.
We are also aware that there are many landlords who have been badly advised by so-called ‘professional’ advisers on the incorporation process and have been charged large fees on the basis of huge tax savings being achieved, many of which are simply not true. For example, one adviser claims that a property company qualifies for full Inheritance Tax relief which is never the case.
If you would like to discuss any aspect of property incorporation, please get in touch.
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