Self-Employed With Broad Business Activities
Pete12
Registered Posts: 58 Epic contributor 🐘
Good morning everyone,
An IT employee with rental income for investment properties wishes to become self-employed as an IT contractor and wants to bring his rental properties into the business ie business activities will be IT, property rental and maintenance.
1) Is this allowable and if so does it mean the profits, losses, expenses of any of the activities are treated fully by HMRC as relating to the same business?
2) Would the CGT implications remain the same for him as he will be a sole-trader (properties remaining "his"/or properties being treated as a business asset - don't know if there is a distinction in this case)?
3) Even if his proposal is allowable by HMRC - are there any reasons why he should not go down this route?
Any help would be greatly appreciated!
Pete12
An IT employee with rental income for investment properties wishes to become self-employed as an IT contractor and wants to bring his rental properties into the business ie business activities will be IT, property rental and maintenance.
1) Is this allowable and if so does it mean the profits, losses, expenses of any of the activities are treated fully by HMRC as relating to the same business?
2) Would the CGT implications remain the same for him as he will be a sole-trader (properties remaining "his"/or properties being treated as a business asset - don't know if there is a distinction in this case)?
3) Even if his proposal is allowable by HMRC - are there any reasons why he should not go down this route?
Any help would be greatly appreciated!
Pete12
0
Comments
-
As he is an individual, the rental income will always be assessed as land and property income, not self employment.
Even if he could bring it all under self employment, there would be no difference to the CGT implications as he is self employeed and thus he is the business.
He could bring it all together in the accounts but would then have to split it out again in the tax return, so there's no point.0 -
And if he is an IT Contractor earning what IT Contractors earn he may find himself skipping self employment and going Ltd, if that's something your comfortable with...0
-
Monsoon,
Thank you - I had thought along these lines but wondered mainly because - what if there was a loss on the rental income - could this be offset against profits of his IT work and vice versa? Also, there is a chance that he may diversify into property management for others - would such an "odd mix" of activities be allowed as a single business?
Clegganator,
Thank you. Yes I agree...but first things first!
Pete120 -
what if there was a loss on the rental income - could this be offset against profits of his IT work and vice versa?
Pete12
Either way it needs to be spilt out and shown separately, can't all be lumped together.0 -
clegganator wrote: »And if he is an IT Contractor earning what IT Contractors earn he may find himself skipping self employment and going Ltd, if that's something your comfortable with...
Thats the option I was thinking of. How feasible it'd be I'm not sure, the Ltd company would need to buy the houses from him.0 -
Which incurs stamp duty and probably less favourable tax treatment on eventual sale.... pretty much, don't go there, more often than not.
It doesn't seem a good idea. How would property sales from a Ltd company be treated, taxed on profit, so you'd lose the capital gains allowance?0 -
-
-
JodieR,
So, losses from IT work could be offset against rental income/profits but not vice versa...what about profits from his proposed property management work (for clients - but not including his own properties which, if I understand it, is considered to be investment rather than earned income)? Sorry to seem like I'm splitting hairs - it's just that I am being presented with a "what if" scenario, which, to be fair, isn't unreasonable I suppose.
Pete12
Monsoon, PGM - thank you as well!0 -
what about profits from his proposed property management work (for clients - but not including his own properties which, if I understand it, is considered to be investment rather than earned income)?
That would be fine. Management services to other people are just a trade. He should keep that separate from his own lettings, and his own lettings management.0 -
That just about does it - for now anyway.
Thanks all!0
Categories
- All Categories
- 1.2K Books to buy and sell
- 2.3K General discussion
- 12.5K For AAT students
- 318 NEW! Qualifications 2022
- 161 General Qualifications 2022 discussion
- 11 AAT Level 2 Certificate in Accounting
- 56 AAT Level 3 Diploma in Accounting
- 87 AAT Level 4 Diploma in Professional Accounting
- 8.8K For accounting professionals
- 23 coronavirus (Covid-19)
- 272 VAT
- 92 Software
- 273 Tax
- 135 Bookkeeping
- 7.2K General accounting discussion
- 200 AAT member discussion
- 3.8K For everyone
- 38 AAT news and announcements
- 345 Feedback for AAT
- 2.8K Chat and off-topic discussion
- 582 Job postings
- 16 Who can benefit from AAT?
- 36 Where can AAT take me?
- 42 Getting started with AAT
- 26 Finding an AAT training provider
- 48 Distance learning and other ways to study AAT
- 25 Apprenticeships
- 66 AAT membership