Hi. Clients spouses have a lease with a limited company owned by one of the spouses that trades from a shop the couple owns the freehold. They don't charge rent so as not to lose Entrepreneur relief. Can they claim the expenses (light & heat, repairs, water, insurance, mortgage interest) against rental income from other lettings? thanks
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No. Those expenses are not incurred for the purposes of the letting business, so are not deductible from the profits of that business.
but surely its a business as there is a lease agreement. does this mean those expenses are a total loss????
I’m with TD, the expenses of the property are not incurred wholly and exclusively for business purposes.
As I know TD likes a citation, HMRC’s view in agreement is presented at PIM2130.
Your clients would probably benefit from paying a little more in tax deductible accountancy fees.
Why is the landlord paying for the light and heat of the tenant company's business? The repairs are probably proper to the company in these circumstances too, as may be some or all of the insurance. Given that the landlord has mortgage interest to pay, it may be that it could be argued that it could be argued that there should be no restriction to ER if a rent is charged to cover the landlord's expenses, which would then make them deductible from such rent. It may even be that ER may not really be an issue in the grand scheme of things.
Nothing here are things that have been closed down. It's just the basic nuts and bolts that distinguish good advice from poor advice.
can you be so kind so as to enlighten us how ER relief would not be excluded if the landlord receives rent up to the mortgage interest?
Well you might want to read TCGA 1992, s 169P, most notably ss 5, and ss 5(d) in particular. I also said, "it might be argued that", incidentally.
