FHL Balance sheet

Double entry to show property on balance sheet?

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Client have buy to let property for last 5 years on interest only mortgage. He wants to use property for air bnb now. Will it be considered as FHL? If yes could you please explain if I need to disclose property on balance sheet. If yes will it be on purchase price or market price? Thanks 

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By Paul Crowley
22nd Jun 2020 23:49

Why does he need a balance sheet?

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Replying to Paul Crowley:
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By Money
23rd Jun 2020 00:08

Client doesn’t want. 2 reasons
1. Client want to sell property after couple of years so I believe he can apply for entrepreneurs relief if property should be on financial statements? Or you think its irrelevant?
2. I would like to know for my general knowledge:)

Please let me know . Thanks

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Replying to Money:
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By Paul Crowley
23rd Jun 2020 01:08

SA tax return will show all letting on rent pages. Assuming not company, see Anon below.
Rent is investment income. I have never prepared any balance sheet for rent income or investment income.
I give clients tax return schedules from the tax software.
FHL may be business like, but it is still investment income. No SEISS.
Capital Gain on sale may well be apportioned, but I would address that on sale
Entrepreneurs relief claim does not need a balance sheet

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Replying to Paul Crowley:
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By Money
23rd Jun 2020 10:55

Hi Paul,
Just one question,
Can I set off FHL loss with other rental income?

Thanks

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By Anonymous.
23rd Jun 2020 00:40

Whether a property qualifies for Furnished Holiday Letting tax treatment is a question of fact which requires the circumstances to be considered against the conditions.

If the property is mortgaged, it would be prudent to check that the mortgage terms permit use other than letting on Assured Shorthold Tenancies.

Which financial statements do you believe the property should be included in? Does the client have a limited company?

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Replying to Anonymous.:
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By Money
23rd Jun 2020 10:22

Thanks for your explanation Anon,

Actually I thought if someone use property for FHL then accounts needed to prepare as similar as normal trading account Where we need p&l and balance sheet but seems I was wrong. Client is not limited company so I will go with your advise and disclose his income same as rental income. Thanks

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Replying to Money:
paddle steamer
By DJKL
23rd Jun 2020 10:38

Do you have vat considerations where a set of accounts might be helpful re your FHLs?

Unlike others I do prepare both P & L and Balance Sheets for our property investment partnerships, though we generally have no vat considerations nor do we do FHLs (in fact we now only own one flat), we find them useful for our banks and for controlling the business.

In our case we do revalue the properties every so often, usually based around professional valuations as and when they are required.

I find accounts useful in helping to ensure nothing gets missed/omitted, but it does of course depend upon the scale of the business and complexity (we have a lot of tenants and a lot of services billings)

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Replying to Money:
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By SXGuy
23rd Jun 2020 10:50

You understand that even a normal trading accounts, theres no requirement for a balance sheet if the turnover is as low as something a FHL would receive?

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By DJKL
23rd Jun 2020 11:00

Two to three FHLs in Edinburgh could certainly knock you up to near £100k pa, I still do a return for someone with a one bed fled in the Old Town and it alone turned over £35k a year

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By Money
23rd Jun 2020 12:05

Hi Anon,

If client has spend significant amount on furniture to furnish house. I believe furniture will consider as an asset? or it will still be part of repair and renovation?

How its possible to claim capital allowances without disclosing financial statement?

Thanks

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Replying to Money:
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By DJKL
23rd Jun 2020 14:00

Capital Allowances Computation.

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