Property Losses - Separate businesses ?

Property Losses - Separate businesses / Loss Transfer?

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A owns property X. Property X makes a profit.
A&B own property Y 50/50.  Property Y has losses in final year - property sold.
All in the same tax year.

Am I correct in thinking that A has separate property businesses here, because of the different legal ownership, and therefore cannot offset 50% of the Y losses against X profit.?

Replies (8)

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JCACE
By jcace
29th Sep 2019 21:45

This is the guidance from HMRC's Property Income Manual:
PIM1020: In most cases all the various types of income from land and property in the UK are treated as parts of the same, single rental business. It does not matter how many properties the taxpayer has, or how many different types of income from land and property. This means that normally all the rental business receipts and expenditure can be lumped together and, hence, that the expenses on one property can be deducted from the receipts of another.
However, if a landlord has income from property in the UK and income from property outside the UK, the landlord is treated as having two business: a UK property business and an overseas property business.
PIM1030: Jointly owned property
Where property is owned jointly with one or more other persons the way the rental income is taxed depends on whether the letting is carried on in partnership. Joint letting does not, of itself, make the activity a partnership.
Usually, there won’t be a partnership and the customer’s share from the jointly owned property will be included as part of their personal rental business profits.
Less commonly, the joint letting may amount to a partnership. If this is the case the share of the profit or loss must be kept separate from any other letting income. A partnership loss can’t be deducted from a personal rental profit and vice versa.

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By unearned luck
30th Sep 2019 02:27

No. If you were right how would you complete the property income pages?

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Replying to unearned luck:
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By Tax Dragon
30th Sep 2019 06:55

That's a fair question, but basing interpretation of law on the format of tax forms doesn't seem sensible.

Or is that your view on where Tooth has taken us?

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By unearned luck
30th Sep 2019 02:37

No.

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By Gone Sailing
30th Sep 2019 09:52

This is the tricky bit:
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim4205
"Losses made in one rental business can’t be carried across to any other rental business the customer carries on at the same time in a different legal capacity (see PIM1020)."

https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1020
Please see the section: "Activities carried on in different capacities", which says "These would all have to be treated as belonging to different rental businesses." and "Any rental business conducted in a different capacity must be kept separate from any personal rental business. A loss on one can’t be set against a profit on another."

In the case I am dealing with it is joint ownership, in personal capacities, not a partnership.

If I am lumbered with this, I presumed I would complete two separate 'Income from Property' sections.

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Replying to Gone Sailing:
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By Tax Dragon
30th Sep 2019 10:00

I thought jcace covered that point adequately, by quoting PIM1030:

jcace wrote:

Usually, there won't be a partnership and the customer's share from the jointly owned property will be included as part of their personal rental business profits.

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Replying to Tax Dragon:
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By Gone Sailing
30th Sep 2019 11:24

OK - thanks - "share" added to "personal", presumed to be 'other personal'.

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Replying to Gone Sailing:
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By Tax Dragon
30th Sep 2019 12:06

"Other personal"?

Is that a term you're reading off your software, or...? I'd say that's even less of a basis for interpreting law, if I'm honest.

But... do check it pops an 'X' in box 3 for you.

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