Income from property

Income from property

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Partnership was established many years ago as property development and profits returned under DI. Year-end 30 June. Latterly, however, the partnership's activities have consisted solely of holding properties as investments and no further change is anticipated. It appears, therefore, that income should really be assessed under what was Sch A and clients would like to regularise matters. There is an ulterior motive - one of the partners has considerable losses from other property, which losses are otherwise unusable.

My problem is the year-end date. Last assessable profits were to 30/6/03. If I want to 'correct' matters for 04/05 onwards, presumably I will need to bring in the entire profit for the period 1/7/03 to 5/4/05, without any transitional relief as I believe existed when Sch A was first brought onto a fiscal year basis.
David Lochhead

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By AnonymousUser
30th Jan 2006 12:57

Thank you, Jon
Is there not an election to overcome the transfer from stock to fixed asset?

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By User deleted
30th Jan 2006 14:01

Set off property losses??
Is it not also the case that property income from a partnership is regarded as a separate property business and that losses, etc. cannot be passed between properties owned directly and those in partnership.

Doesn't change the fact that the income is probably from a property business rather than trade.

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By MBK
28th Jan 2006 13:08

Not too sure about the income.....
but there is a major trap here. If you convert from property development (ie trading) to property investment you have a transfer of trading stock to fixed assets and the client will be subject to Income Tax on the uplift in value to market value at that date - which may be in a year which is already closed. Could be a whole bundle of tax.

You may find, on querying the client, that his motives are still property development and that he intends to sell the stock when the market is (in his judgement) good enough. In the meantime he is letting them to cover costs etc. If that is the case then you should carry on as previously - although you are sacrificng Taper Relief.

Bit of a tricky one I'm afraid.

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