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Trading or Investment Company?

Gem7321Gem7321 Experienced MentorDevonMAAT, AAT Licensed Accountant Posts: 1,438
I have a potential new client. This is a new scenario for me!

Ltd. co. client rents property from an unconnected agent. The ltd. co. does not occupy to the property.
The ltd. co. sublets the property to unconnected tenants.

As the co. doesn't own the property it is subletting, can it be classed as investment income? Or do I need to report it as trading income? I keep making a decision then talking myself out of it :)

Any comments gratefully received.

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    Hi @Gem7321
    Not an answer but more questions!
    What is the main activity of the Ltd Co?
    When subletting, does it just collect rents or does it actively manage the property?
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Hi @MarieNoelle

    Per Companies House the main activity of the Co is Other letting and operating of own or leased real estate. The company does manage the property which is making me lean towards trading as a property management company rather than a property investment company
  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,431
    In that case I would also say it's a trading company.
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    Not sure what you're getting at @Mickdundee? The company leases the property from the owner, and the subleases are between the tenants and the company
  • Gem7321Gem7321 Experienced Mentor DevonMAAT, AAT Licensed Accountant Posts: 1,438
    The company actively manages the property including advertising etc.
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