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Limited company property business

Allowable costs

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Hi, we have a company with a plot of land that is being leased to 3 individual tenants. One lease is pure ground rent whereas the second/third invole the building of units for rent. We are considering whether contributions can be made to the directors pension scheme which will achieve relief for corporation tax. Am I correct that the rental profits / expenses are now treated simply as a property business as opposed to treating costs as management expenses. Therefore assuming we can justify the premiums as part of a reasonable directors package we should be OK?

Many thanks for any thoughts.

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By DJKL
19th Jun 2019 11:09

Do not see why not, we have property investment companies and just put rents less costs into box 190 and I suspect all you need to consider is Wholly & Exclusively re the costs.

Not sure about your management expenses point, I have never considered any of our costs as management expenses- and that covers over twenty years of doing our CT comps - do you do other things beside property?

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to DJKL
19th Jun 2019 11:19

Thanks DJKL my management expenses point was relating to old rules which I think are now long gone.

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By DJKL
to millertime
19th Jun 2019 11:35

I think I recall that a property investment company was never an investment company (albeit it had the words in it) so not sure the management expenses point ever really applied to them;-certainly that was my understanding.

Having said that I really cannot remember the last time I ever dealt with an investment company's tax, probably very early 1990s, so hardly speaking from a position of strength.

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to DJKL
19th Jun 2019 11:52

Actually. Property investment companies are now and have always been companies with investment business. As such only the direct costs of the rental business are deductions from the rental profits. Things like director's remuneration are most certainly management expenses (now and forever - post April 1965- previously). The distinction is, of course, largely irrelevant, but that is the correct technical position.

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By DJKL
to Vile Nortin Naipaan
19th Jun 2019 12:26

That is interesting , although as you say now academic, but thanks anyway and my apologies to the OP for my error.

Having just revisited a somewhat dated Property Taxes 2009/2010-Maas, he confirms your point but does suggest HMRC would seek apportionment of directors' costs between their role within the property business and their role managing the company.

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19th Jun 2019 13:03

CTM08330, CTM08344 and CTM08440 (in particular) offer guidance.

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