38 taxation & finance
Landlords will profit from early tax planning
Tax changes are causing considerable concern for property landlords who will be affected by the gradual introduction of reforms from early next year. But early tax planning can make a significant difference to their profits, says Alan Rolfe (pictured), senior tax manager at HWB
Among the tax changes for residential landlords, the most impact will come from a loss of tax relief for loan interest where this would be given at the higher rate or additional rate of income tax.
Although this change is only being gradually phased in from April 2017, the time for planning is already here.
The impact of this, when combined with other tax changes, means that owning rental property in a company may now become the preferred way to hold these investments.
The reasons are that:
• Full loan interest relief is available against the rental income
• There are lower tax charges on the net rents, as corporation tax is only 20% and is due to reduce to 18% by 2020
• Tax-free dividends of up to £5,000 can be drawn from the company
• There is flexibility in planning using the company shares, which can particularly help with inheritance tax and capital gains tax planning when seeking to transfer ownership.
Any existing property that does not have significant gains or loan finance could also be considered for transfer into a company.
Another issue on the horizon for landlords is the probable scrapping of the 10% ‘wear & tear’ allowance for fully-furnished property. Unless HMRC has received significant objections, the change will happen on April 6, 2016.
As part of the plan to scrap the allowance that landlords of furnished properties claim, it is proposed to introduce the
right to claim the full cost of all replacement furniture, furnishings, appliances and kitchenware.
Helpfully, this is also likely to extend to landlords of partially- furnished properties, who since April 2013 have been prevented from claiming any costs for appliances and furnishings.
Allowing the replacement costs to qualify for tax relief means it is likely that all landlords will be able to claim a deduction for the replacement items such as carpets, curtains, white goods, furniture, televisions and linen.
To maximise the tax benefit from the renovation and refurbishment of let property, we strongly advise that landlords consider deferring any spend on replacement goods until the 2016/17 tax year.
Landlords need to begin tax planning now, before these
Enterprise M3 makes £2 million funding available
Businesses and the public sector can bid for a share of a £2 million fund which has been launched to support regeneration projects in Surrey and Hampshire.
The funding, a new round of the Growing Enterprise Fund, has been launched by the Enterprise M3 Local Enterprise Partnership (the LEP). The fund was set up in 2012 to support economic growth by addressing infrastructure and site constraints which might be impeding development.
Qualifying projects could include: transport, utilities, broadband, flood-defences, land remediation and innovation/enterprise centres. Enterprise M3 is seeking projects that:
• deliver economic growth, especially jobs and housing
• enable development where there is proven demand
• kick start or bring forward development
• can be delivered soon
• can repay the funding quickly • offer value for money
• help to deliver the Enterprise M3 strategic economic plan.
Investment must be capital and all projects must deliver benefits for the Enterprise M3 area.
Funding from previous rounds has already been allocated – Farnborough International received funding for infrastructure improvements, and the fund has also created two further
investment funds to support local SMEs. These projects have created more than 750 jobs stimulating the local economy for the benefit of business and local communities.
Geoff French CBE, chair of the LEP, said: “This fund is about giving our projects in the area the boost they need. It could be particularly useful for development sites which currently need a helping hand.”
Details:
www.enterprisem3.org.uk
changes start to have an impact next year. Using a company to hold investment property, in particular, needs proper advice and planning which is something that HWB can help with.
For further information on tax planning, contact Rolfe at the details below.
Details: Alan Rolfe
023-8046-1200
alan.rolfe@
hwb-accountants.com www.hwb-accountants.com
www.businessmag.co.uk
THE BUSINESS MAGAZINE – SOLENT & SOUTH CENTRAL – NOVEMBER 2015
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