Property Tax Insider Monthly Newsletter

A popular strategy for property investors is the converting an ordinary dwelling into an house in multiple occupation (HMO). Adapting such a strategy typically generates a significant uplift in rental income and profits.

Lee Sharpe considers the tax implications for adapting a property for designation as a house in multiple occupation.

Subdividing land will generally be for one of the following three purposes; where the owner intends to: 1. develop the land to retain it for a specific purpose (e.g., building a separate 'granny annexe'); 2. develop the land for selling at a profit or for renting out; or  3. sell the land to a third party for development and sale.

Jennifer Adams considers the reasons a landowner may wish to separate land from their main residence and the possible tax implications in doing so.  

It is common for married couples (or civil partners) to own assets jointly (e.g., the family home). On the first spouse to die, the question arises whether the market value of their property interest can be discounted for inheritance tax (IHT) purposes to reflect the fact that they did not own the whole property (such that the consent of the surviving spouse would have been needed before the property could be sold).
 
Mark McLaughlin looks at the ‘related property’ rules for inheritance tax purposes and their potential effect when valuing property jointly owned by spouses or civil partners.  

Most people do not expect to have to pay capital gains tax (CGT) when they sell their home. Private residence relief (also known as main residence relief or principal private residence relief) normally applies in full when the property has been the taxpayer’s only or main residence throughout the whole period for which they have owned it.  

Sarah Bradford outlines the concept of a ‘main’ residence for capital gains tax purposes. 

Most individuals who own a house assume (or at least hope) that principal private residence (PPR) relief from capital gains tax will be available when they dispose of the property. 
 
Mark McLaughlin warns of difficulties potentially faced by individuals seeking capital gains tax private residence relief with little or no evidence that the property was occupied as their only or main residence. 

The government (HMRC) has become increasingly worried about the volume of small and medium-sized enterprise research and development (R&D) tax credit payments where a company claims to have undertaken eligible R&D activity (and it is important to keep in mind that only certain types of R&D may qualify – there are a lot of criteria).

Lee Sharpe looks at tax aspects of modernising property and the risk of disallowance as improvements that constitute capital expenditure, losing income tax relief in the property business. 

Whether to buy commercial or residential property depends on various factors, not least the more beneficial tax system for commercial lets and whether an individual or a company is purchasing the property. The government wishes to encourage commercial lets and therefore permits a more generous tax regime than residential lettings. 

Jennifer Adams considers some important tax benefits of investing in commercial property.

When it comes to letting residential property, not all property is equal in tax terms – lettings that qualify as ‘furnished holiday lettings’ (FHLs) benefit from special tax rules.  

Sarah Bradford outlines the implications for landlords of the end of the furnished holiday lettings tax regime and asks if it is worth selling before 6 April 2025 to benefit from the existing capital gains tax reliefs. 

This article sets out to cover some useful tax pointers to consider in contemplation of property transfers. 
 
Lee Sharpe considers some key tax aspects of property transfers.

Every building has a life span - usually between 80 and 100 years. Older buildings require a considerable amount of maintenance, and there comes a point when repairs are not always cost-effective. 

Jennifer Adams considers the tax implications of demolishing a residential property and rebuilding from scratch rather than just renovating.  

For capital gains tax (CGT) purposes, all gains are not equal. Higher rates of tax apply where the gain relates to residential property. There are also stricter reporting and payment deadlines. 

Sarah Bradford examines the impact of the reduction in the higher rate of capital gains tax on residential property gains and the rules for reporting the gain and paying the tax. 

‘Pre-owned assets tax’ (POAT) is an income tax charge (FA 2004, Sch 15), which was originally introduced to block certain inheritance tax (IHT) anti-avoidance arrangements. However, it can have unintended and unfortunate consequences in some cases. 

Mark McLaughlin looks at pre-owned assets tax and the ‘occupation’ of land and buildings.