Property matters – business or investment?
There has been a fair amount of activity and debate with HMRC recently about whether or not property letting businesses are, in fact, businesses for the purpose of Capital Gains Tax Rollover Relief and/or Inheritance Tax Business Property Relief. The general consensus of decisions seems to be that for property letting activities to qualify as businesses the owners need to provide substantial additional services and not just those that are commonly associated with landlord activities.
HMRC has now further raised the bar by updating its National Insurance Manual to confirm that Class 2 National Insurance is payable only by those individuals letting property where those activities amount to a business rather than just an investment. It would appear, therefore, that to have any chance of succeeding in a claim for business treatment, registration for National Insurance and payment thereof will be a necessity.
Unfortunately, this will not guarantee success but the lack of it will almost certainly mean that a claim for business relief will be rejected. If owners did not believe it was a business initially then HMRC is unlikely to allow them to change their minds without substantial changes in activities.
Date: 4th August, 2015
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