Tax planning for landlords and property businesses

Property businesses come in many different shapes and sizes, from a simple rental business to longer term building and development projects. Whatever your venture, there are a range of taxation issues which will need to be addressed from the outset, as well as a number of specific tax planning aspects and opportunities to be considered.

Everyone wants their business to be successful, but the amount of tax you pay is naturally linked to the profitability of your business. However, with careful planning at critical stages of your business planning cycle, considerable savings can be made.

Key issues to consider

While tax planning is important for any business, there are a number of areas which those operating in the property sector will need to take into consideration when planning ahead.

These are:

  • Business structure – who should be involved and should you be a sole trader, partnership or limited company?
  • Will your venture produce income or capital gains? This will determine how your business is taxed.
  • Which taxes will apply? Depending on your business, this could include income tax, corporation tax, capital gains tax, VAT, inheritance tax and stamp duty.
  • Look at the bigger picture – plan for the long-term, not just the short-term.
  • Capital allowances – will you be able to claim this tax relief on your expenditures and will all expenditure be tax deductible?
  • Construction Industry Tax Scheme – do you need to register?
  • Exit strategy – whether you are retiring or simply moving on to another venture, how can you do so in the most tax effective way?
  • Business location – are there tax advantages to working from home?
  • Profits – how can these be extracted from the business?
  • Tax legislation and anti-avoidance rules – do any specific rules apply to your venture?
  • Finally, is your venture actually a business at all?

Where tax savings can be made

Which taxes you have to pay and how these can be mitigated will depend on the type of business you have and how it is structured. Examples include:

  • Capital gains tax
  • Capital allowances
  • Repairs and maintenance
  • Stamp duty land tax

Will your business be subject to VAT?

VAT is a notoriously complex area of tax, particularly where property transactions are involved. Getting this aspect of your property business wrong could have serious cash flow and tax compliance implications, so specialist VAT advice should be sought before undertaking any development, venture or property transaction. At Lamont Pridmore, we can advise you on all aspects of VAT, including partial exemption, opting to tax and how much you can recover on your expenditures.

The Construction Industry Scheme

HM Revenue and Customs (HMRC) has put rigorous special tax compliance regulations in place for the construction industry where subcontractors are used on projects. Failure to follow these rules could lead to severe and avoidable tax penalties and the loss of “qualifying status”. In the worst cases, contracts could be lost as a result of action by HMRC.

It is also worth noting that increasingly aggressive anti-avoidance legislation has been introduced in recent years, some of which is aimed specifically at UK property owners.

At Lamont Pridmore, we can advise on how any of these measures will affect you and how to avoid falling foul of the taxman.

Non-Resident Landlords

If you have rental property either commercial or residential in the UK but your usual home is outside the UK then the Non-Resident Landlord Scheme (NRLS) will apply.

Lamont Pridmore property team are experts in providing non-resident property owners at every level with considered tax advice that helps you minimize your tax position and maximize your UK investment.

Tax planning for landlords and property businesses Download our flyer ‘Buy to Let Market Faces Tough New Rules’ for the latest changes in tax rates and reliefs.

To find out how Lamont Pridmore can help you, please contact us.