Hi All
A Client of mine has been building a property portfolio to provide him with rental income.
He now has aquired 12 properties (2 are joint owned), all are mortgaged. The income he receives from these properties is his primary source of income.
While completing his 2013 accounts, it became obvious that there are a number of expences that cannot be attributed to a specific property but are incurred in the 'general' management of the 'estate'. The largest of these are two 'cash' loans borrowed from private individuals, paying a market rate of interest, the funds of whch have been used across the 'estate' to help fund mortgage deposits, refurbishment work etc etc.
Apart from the significant work in preparing 12 rental property accounts, and the subsequent reporting of them on SA100, I wonder if this income should be viewed as a business and, therefore, reported under Schedule D tax rather than Schedule A? This would certainly make claiming the 'general expences' much easier.
The down side of this would be that the Client could be liable for Class 4 NI and ideally this could all be wrapped up in a Ltd Company but the properties are all in personal names so would prove difficult.
I'm sure this issue has cropped up with a number of Clients out there, if anyone has any feedback on how they handled this question, I would love to hear their thoughts.
Thanks in advance
Replies (4)
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From the start
Schedule A and schedule D were abolished some years ago - probably when self assessment was introduced (1996?). Letting of property is now regarded as a business (but not a trade) and general expenses (even bank overdraft interest) are allowable, subject to the wholly and exclusively rule. Class 4 NIC wouldn't normally apply unless the business provides a range of services over and above rental.of premises
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I think you are getting in a bit of a muddle.
On what basis are you drawing up the allowable interest so as to exclude the additional loans?
And whilst I would draw up 12 rental accounts myself for management purposes if nothing else, there is no requirement to file anything other than aggregated accounts on your SA100.