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May partners in a LLP claim rent a room relief?

A couple have established a cafe and B&B business and wish to claim the relief

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They would be eligible for rent a room relief as individuals but put turnover through LLP used for cafe. In year 1 it was advantageous to ignore rent a room as set up expenses exceeded income. That will not be true in year 2. They wish to continue with putting the revenus through the LLP for insurance purposes but would reduce tax if the income can be viewed as non taxable in LLP with no expenses claimed. 

Companies cannot claim RRR but can LLP in this situation, and if so, do you simply treat the income as non taxable in LLP's computation?

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By Tax Dragon
21st Oct 2020 08:12

Aren't set-up expenses capital?

There's nothing like planning ahead is there? No I mean it, there's nothing here like planning ahead.

And I'm baulking slightly at your "They wish to continue with putting the revenus through the LLP for insurance purposes". An LLP is a separate legal entity. If it owns the business, it receives the income.

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Replying to Tax Dragon:
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By beechenhurst
23rd Oct 2020 17:15

Thank you for response.
The LLP was established to run a cafe within he confines of the property the room renting came about as an incidental and as it is in same property, seemed sensible.

Room rent relief was not desirable anyway in year one as expenses (mainly capital) exceeded revenue. So there was 'planning ahead'.

The question really revolves around whether it would be better now to rent the rooms as individuals or can they continue to put the funds through LLP and claim RRR. As individuals, it will require some insurance realignment but that is doable. It just would be easier if they are treated as individuals for this purpose.

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Replying to Tax Dragon:
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By beechenhurst
23rd Oct 2020 17:16

duplicate post

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By Duggimon
21st Oct 2020 09:20

How many businesses are there? Who owns the business(es). Who owns the property? If nobody involved has the first idea about how any of this works, why is there an LLP?

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Replying to Duggimon:
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By beechenhurst
23rd Oct 2020 17:20

One business

the partners own the business, which is the normal way with a partnership.

the partners as individuals own the property

the LLP is established because business runs a cafe within the confines of the property and partners were advised that LLP structure was advisable from point of view of liability, I understand.

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By Cheshire
21st Oct 2020 19:33

Both posts thanked, yet no response to the questions. Shame when folk take the trouble to respond!

Or was that you hitting that thanks button Paul Crowley?

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Replying to Cheshire:
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By Paul Crowley
22nd Oct 2020 04:32

In this case it was not me
BUT your assumption was not unreasonable because I do that that regularly
I have been outed as as a thanker

EDIT
PLEASE do not mispronounce the last word

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Replying to Cheshire:
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By beechenhurst
23rd Oct 2020 17:21

Well, sorry. Have responded now. Didn't realise it was so urgent to reply.

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By The Dullard
22nd Oct 2020 10:37

"An individual qualifies for rent-a-room relief if the individual has rent-a-room receipts for the year". So, the question is, "is an LLP an individual?" and that question has a surprisingly simple answer, which has already been alluded to.

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Replying to The Dullard:
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By beechenhurst
23rd Oct 2020 17:27

Indeed, but one assumes that RRR would be available if the business traded as a partnership without LL. The taxation of LLPs is identical to partnerships, so is it such a huge leap of faith to assume RRR is available, notwithstanding the legal entity point?

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Replying to beechenhurst:
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By The Dullard
27th Oct 2020 18:36

Nope. One would not think that. A general partnership is also not an individual. That's why an individual that is a member of a property investment partnership can't set their share of the losses of the partnership property business against their profits of their own property business, and vice versa. In one case, the person carrying on the business is the individual; in the other it is the partnership, or vice versa.

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