Establishing which category your property falls into can help you find out the specifics of your tax obligations.

What type of property do you own?

Defining if your property is a furnished residential let is simple.

If your residential property is either partially or fully furnished at the time that it was let out, then it is a furnished residential let.

However, defining your property as a FHL is more complex. For your property to be an FHL, it must be:

• Furnished sufficiently for normal occupation
• In the UK or European Economic Area (EEA)
• Let to make a profit
• Available for letting as an FHL at least 210 days out of the year
• Let commercially for at least 105 days a year
• Long-term lets over 31 continuous days don’t exceed 155 days of the year.

Whichever property type yours falls into, you must understand your tax obligations and available reliefs.

Furnished residential lets

There are limited tax reliefs available for furnished residential lets. Since 6 April 2020, Income Tax relief has been limited to the basic rate of Income Tax. They are also limited to the lowest mortgage interest, furnished let income, or your adjusted total income.

You may want to consider offering your property unfurnished, as there is no longer a ‘wear and tear allowance’ for landlords to deduct from their taxable earnings.

There is the ‘replacement of domestic items relief’, which allows you to claim certain items as expenses, as well as disposing of the old item.

Furnished Holiday Lets

Currently, FHL owners can enjoy significant tax benefits. However, the Furnished Holiday Let allowance is set to be abolished in April 2025, meaning that there will be fewer tax benefits for landlords.

Under the current regulations, FHL owners can benefit from:

• Claiming up to £1 million of capital expenditure under the Annual Investment Allowance (AIA)
• Costs such as mortgage interest are fully deductible from rental income, lowering your taxable income
• Business Asset Disposal Relief can replace GCT if their operations are classed as a business
• Earnings from FHLs are considered earned, so are eligible for relief at the owner’s highest rate of Income Tax.

Unfortunately, FHLs will likely come under the same rules as residential holiday lets from next year. This means that there will be less tax benefits to owning a FHL instead of a residential rental property.

If you need advice with your property taxes, our team are here to help.

Get in touch today to discuss tax relief for your rental properties.

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The two main changes impacted:

• Capital Gains Tax (CGT) on most property disposals
• Furnished holiday lettings

It is important you understand these changes, when they come into effect and how you will be impacted so you can ensure you remain compliant with your tax obligations.

How is my CGT obligation changing?

As long as the property is not your main residence, any residential property you sell for a gain is liable for CGT.

Usually, residential property gains would be taxed at 18 per cent for gains that fall within the basic rate band and then 28 per cent thereafter.

However, from 6 April this year, the higher rate will be reduced to 24 per cent – this affects property sales that are exchanged on or after this date.

You need to submit property returns but you also need to be aware that any forms submitted from 6 April may still be required to use the 28 per cent rate if the sale was exchanged on or before 5 April.

This is due to the 60-day reporting requirement and is important to know so you are up to date with your tax obligations.

To remain compliant with your CGT obligation, you should:

• Report gains online
• Pay the tax within 60 days if the completion date was on or after 27 October 2021; or
• Pay the tax within 30 days if the completion date was between 6 April 2020 and 26 October 2021

When you complete the tax return, you need to show the disposal proceeds before any deductions.

After this, you can claim the cost of buying the assets and broker fees as allowable costs.

If you are a landlord, you will be able to benefit from the lower rate of CGT on property disposals if you choose to sell your property after 6 April.

This is due to the abolishment of the Furnished Holiday Lets preferential tax regime from April 2025 which is discussed below.

Will my furnished holiday letting be affected?

From 6 April 2025, the Furnished Holiday Lets preferential tax regime will be abolished.

As a result, your furnished holiday letting will be treated as a property investment business from 6 April 2025.

However, the decision to abolish this regime means the following tax benefits of being treated as a trade will be lost from 6 April 2025:

• Interest for businesses operated by an individual will cease to be a deduction and relief will instead be given as a 20 per cent tax credit from the individual’s tax liability. If you are a higher rate taxpayer, you will receive a reduction in tax relief for interest to the 20 per cent rate
• Expenditure on qualifying assets will not be eligible for capital allowances from 6 April 2025 although you might be able to instead claim a deduction from profits for the cost of replacing domestic items
• If you rely on profits of your furnished holiday lettings business to support obtaining tax relief for their pension contributions, you will need to seek our expert advice as your profits will no longer be treated as relevant earnings from 6 April 2025

To help combat these changes, you will need to evaluate your business operations and ensure you are compliant with your tax obligations as a property owner.

If you would like to know more about the changes and how you will be affected, please get in touch with a member of our team today.

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This article will explore the five important elements in identifying promising investments in the residential property market.

Five tips for investing in property

• Research: The most vital element when investing in property markets. Your research should include property values, rental yields, occupancy rates, and market trends in the area.
• Work out your goals: Defining your investment strategy will guide you to the property best suited to your needs. You’ll need to work out whether your strategy is the pursuit of long-term appreciation or short-term gains.
• Stick to your budget: Avoid the temptation to over-invest. Remember that there are risks involved in any property investment so start small and stick to the budget you know you can afford.
• Plan your strategy: There is a big difference between buy-to-let and buy-to-sell investments. Knowing your strategy before getting stuck in can keep you on the straight and narrow during your investments.
• Seek professional help: Seek professional advice to help you understand the local economic and political landscape. An expert accountant can help you organise your finances to ensure you are in the best position to invest.

Investing in property presents an exciting opportunity for those looking to expand their wealth through real estate.

In the ever-evolving landscape of the property market, staying informed and adapting to market trends is vital.

Speaking to an experienced accountant can save you money and time in your investment journey whilst protecting you from potential pitfalls.

To find out more about our property services, get in touch with one of our expert team.

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Understanding the differences is crucial to selecting the best one for your business.

• Gross leases include most costs like taxes, insurance, and maintenance within the rent. They offer more predictable monthly expenses but may come with a higher upfront cost.
• Net leases require the tenant to pay some or all the property-related expenses. These offer lower rent but add complexity in budgeting and financial planning.
• Percentage leases involve paying a base rent plus a percentage of sales. These are suitable for retail businesses but require careful consideration of the financial model and whether the business will make enough sales for you to profit.

The flexibility to negotiate terms can allow you to alter a lease to suit your business needs. Including the duration of the lease, the existence of regular rent reviews, break clauses, and outlining your responsibilities for repairs and improvements.

Different leases may also offer tax benefits or obligations. For example, the ability to deduct rent as a business expense can be a significant advantage for small businesses.

We can provide tailored support to help you make informed decisions that enhance your portfolio’s success. Get in touch to find out more.

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Below are the essential questions you should ask yourself about any property location before you invest your money.

• Economic factors: Is the area growing in economic prosperity?
• Infrastructure: Are there good transport links connecting your property to nearby important places?
• Supply and demand: Is your property being devalued by the availability of other investment options?
• Historical performance: Has the area had consistent growth over a long period?
• Environmental considerations: Is the property at risk of flooding, near hazardous or unsightly materials (recycling centres, etc.), or in a wildlife protection zone?

An accountant cannot perform location analysis for you, but they can make the rest of the property investment process easy, simple, and effective.

Professional guidance from an accountant

Location analysis is a multifaceted process that requires a methodical and well-informed approach. Whilst you work on that, your accountant could be working on making the rest of the investment process smooth and simple.

An accountant can advise you on cash flow management and financial modelling so that you stay on top of your investments and have a successful portfolio.

In addition, your accountant will produce a certificate that outlines your financial well-being to a mortgage lender.

They can also work closely with your other advisors, like your estate agent, to streamline the buying and selling experience.

By seeking professional guidance from an accountant, you can make well-informed investment decisions and ensure that your property has a positive impact on your finances long-term.

Feel free to reach out to our experienced team for advice tailored to your specific investment needs and objectives.

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Here are five financing options to consider when you are looking to expand your business’ property portfolio.

Bank loans

Traditional bank loans are a common way to finance property expansion. Small business owners can approach their bank with a well-prepared business plan and financial forecasts and banks typically offer competitive interest rates.

In addition, the repayment terms can be negotiated to align with your business’s cash flow to give you more control of your outgoings.

Commercial mortgages

If purchasing a new property, a commercial mortgage may be suitable.

Like a residential mortgage, it allows you to spread the cost over a much longer period.

However, the terms and conditions can be complex, and professional financial advice from an accountant is essential to navigate this path successfully.

Asset financing

For businesses with valuable assets such as machinery or vehicles, asset financing can be a useful option.

This involves using existing assets as collateral to secure funding. It can be a flexible way to obtain finance without compromising cash reserves.

However, if the asset is essential to the business, it can be risky to use it as collateral. Falling behind on payments could mean that the asset is seized.

Crowdfunding

A more recently developed and innovative way to raise funds is through crowdfunding.

By presenting your expansion project on a crowdfunding platform, you can attract investments from individuals who believe in your business idea.

This method may also serve as a promotional tool, creating awareness and building excitement around your brand.

Government grants and schemes

Various governmental bodies offer grants and financial schemes to support small business growth.

These often target specific industries or regional development and can be an attractive option due to favourable terms or even non-repayable grants.

Next steps

Financing property expansion requires careful consideration of the available options and a deep understanding of your business’s financial position and growth prospects.

Each financing method comes with its unique advantages and challenges.

Engaging with an accountancy firm that knows your industry and can guide you through the complexities of financing your property expansion is essential.

To find out how we could help your small business grow to new heights, get in touch.

The post Looking to expand your property? Here are five financing options to get you started appeared first on Grunberg & Co.

it’s commonly associated with traditional tour operators, the scheme’s flexibility means it can also be applied in less conventional settings, such as the “rent-to-holiday-let” market.

If you are a landlord or you’re sub-letting a property in the holiday-let market, TOMS could provide some much-needed VAT benefits for your business.

How TOMS works

Before looking at its application for your business, it’s crucial to understand how TOMS works.

The scheme allows businesses to account for VAT on the margin between the cost of purchasing and reselling travel-related services.

This eliminates the need to register for VAT in each EU Member State where the services are consumed.

TOMS typically covers a range of services including accommodation, passenger transport, and even the use of special airport lounges.

Applicability in the rent-to-holiday-let sector

The “rent-to-holiday-let” market involves renting a property and then sub-letting it as a holiday accommodation.

This business model can benefit from TOMS in several ways:

• Simplified VAT process: Managing VAT can be complex, especially when dealing with properties in different jurisdictions. TOMS can simplify this by allowing VAT to be accounted for only on the profit margin.
• Inclusive services: Often, holiday lets offer additional services like airport pickups or guided tours. These can also be included under TOMS, further streamlining the VAT process.
• Package deals: If you’re offering a package that includes not just the accommodation but also other services like transport or excursions, TOMS can be particularly beneficial. It allows you to account for VAT on the entire package rather than each individual component.

Financial benefits

Utilising TOMS can result in financial advantages for your holiday-let business:

• Cost-efficiency: By accounting for VAT only on the margin, you could potentially lower your overall tax liability.
• Cash flow: The scheme can improve cash flow by deferring the point at which VAT needs to be accounted for, giving you more working capital in the interim.
• Competitive pricing: The cost savings can be passed on to customers, making your holiday lets more competitively priced.

While TOMS is not often the first thing that comes to mind in the “rent-to-holiday-let” sector, its benefits are hard to ignore.

From simplifying VAT obligations to offering financial benefits, TOMS can be a valuable tool for individuals and businesses venturing into holiday lets.

As always, it’s advisable to consult an accountant to ensure that TOMS is the right fit for your specific business needs – especially considering the complex nature of the TOMS scheme.

Our accountants are ready to answer your questions on TOMS and any other financial queries you might have. Please get in touch if you require more information.

The post What is TOMS in the rent-to-holiday-let market? appeared first on Grunberg & Co.

By gaining clarity, you can make informed decisions, optimise your finances and sidestep potential pitfalls.

When is VAT applicable on commercial properties?

Commercial property ventures can be classified into four categories – ‘standard rated’, ‘zero-rated’, ‘outside the scope’ and ‘exempt’.

Properties under the standard-rated category have a VAT rating of 20 per cent.

Typically, the purchase or lease of commercial properties is exempt from VAT, sparing both the buyer and seller from any VAT obligations.

However, there are exceptions to this, including:

• Newly constructed commercial properties (less than three years old) are classified as standard-rated
• Owners have the flexibility to apply VAT, referred to as ‘opting to tax’, on rental amounts, which then become standard-rated
• Specific commercial refurbishments might also be under the standard-rated VAT category

The decision to ‘Opt to Tax’

Choosing to ‘opt to tax’ your property implies a decision to levy VAT on its rent.

The primary advantage here is the potential recovery of VAT on correlated costs such as repairs, upkeep or professional fees.

However, this might not always appeal to tenants, particularly those who cannot recuperate the VAT.

Transfers of going concern (TOGC)

In certain scenarios, a commercial property transaction can be classified as a TOGC.

If the property being sold is already set up as a rental business (existing tenants or an ongoing lease), and the potential buyer plans to maintain this model, it might be considered a TOGC.

Properties categorised as a TOGC are classified as ‘outside the scope’ of VAT, eliminating any VAT payment. This can be financially advantageous for buyers in such situations.

To be recognised as a TOGC, the buyer should mirror the seller’s VAT status by the date of transfer.

Essentially, if a seller is VAT-registered and has chosen to tax the property, the buyer should follow suit.

It is crucial that this ‘opting to tax’ decision is communicated to HM Revenue & Customs (HMRC) prior to the transfer cut-off.

Seek expert advice

Due to the intricacies of VAT, it is strongly recommended to liaise with accounting specialists.

The ever-evolving landscape of VAT regulations can be challenging, and any oversight could attract hefty fines.

Each transaction stands on its unique merits and calls for tailored accounting guidance. Collaborating with accounting professionals ensures that you are on the right side of the regulations, protects your financial interests and provides insight into upcoming regulatory changes.

Although VAT rules linked with commercial properties might seem overwhelming, by understanding the basics and recognising areas for savings, you can confidently handle VAT nuances.

For more advice on VAT for commercial property investments, get in touch with our expert team for advice.

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SDLT is a complex issue.

We answer some of the most common questions about it.

What are the rates of SDLT?

It’s worth clarifying what the current rates of SDLT are before discussing some of the most common questions.

Individuals usually pay SDLT on increasing portions of the property price when you buy a residential property.

The amount you pay is determined by the following:

• When you purchased the property
• How much you paid for it

A useful SDLT calculator can be found on the Government website.

The amount you pay is dependant on either the property, lease premium, or transfer value.

You are liable to pay Stamp Duty at the following rates if, once you have bought the property, it is the only residential property you own:

• Up to £125,000 – Zero SDLT rate
• The next £125,000 (the portion from £125,001 to £250,000) – 2 per cent SDLT rate
• The next £675,000 (the portion from £250,001 to £925,000) – 5 per cent SDLT rate
• The next £575,000 (the portion from £925,001 to £1.5 million) – 10 per cent SDLT rate
• The remaining amount (the portion above £1.5 million) – 12 per cent SDLT rate

Do you have to pay an SDLT surcharge if you are buying a second residence?

The three per cent SDLT surcharges cause a great deal of confusion.

This confusion surrounds when someone is purchasing a main residence, but already owns another property. In some instances, the timing of the purchase is key to avoiding an expensive mistake.

Consider the higher rates as a flow chart:

• If you hold an interest valued over £40,000 in any worldwide residential property?
  • If yes, the higher rates may apply
  • If nom then you are not in the scope of the higher rates
• Have you disposed of the main residence within the last three years?
  • If yes, the higher rates will not apply as long as other conditions are met

Do I qualify as a first-time buyer and get the SDLT discount if I am purchasing my first home?

To qualify for the SDLT first-time buyer discount you cannot have held either a freehold or leasehold interest in a residential property anywhere in the world.

This is inclusive of properties you might have inherited or been gifted if you are a beneficiary of a trust.

At present, first time buyers paying £300,000 or less for a residential property pay no SDLT.

First time buyers who pay between £300,000 and £500,000 pay SDLT at 5 per cent on the amount of the purchase price in excess of £300,000.

If I gift a let property to someone do they have to pay SDLT?

SDLT is always calculated on chargeable consideration, or money/money’s worth.

Since a gift is freely given, no money changes hands.

It is important to note that “money’s worth” includes debt.

Therefore, if you gift property with a mortgage, SDLT will be chargeable on the value of the mortgage being transferred.

If I transfer my property portfolio for zero consideration into my company does the company pay SDLT?

There is a common misunderstanding surrounding this question.

Any transfer from individuals to a connected company occurs at market value.

If you need advice on Stamp Duty Land Tax, contact us today.

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