Being A landlord is not a business

steampowered

Another posted already linked you to HMRC's property income manual which states in black and white that "Profits from UK land or property are treated, for tax purposes, as arising from a business.".

Obviously, the requirements for different taxes vary according to the requirements set out in the relevant legislation. The requirements in relation to capital gains tax differ from the requirements for income tax, which will differ again from the definition of a "business" under the Unfair Contract Terms Act.

The guidance you linked to concerns class 2 national insurance contributions. Class 2 national insurance are paid if you are self-employed. Hence why only landlords who do it as their main job are caught.

Regarding "tax relief". Any company who borrows money to invest into it's business is entitled to offset the cost of that borrowing 100% agsint profits at the prevailing tax rate, no one refers to that as being tax relief.

I think you are confusing the concepts of running a business as an individual and running a business through a limited liability company. They are taxed differently.

Even with regards to running a business as an individual, your statement that all borrowing can be offset is simply wrong. Read https://www.gov.uk/expenses-if-youre-self-employed/legal-financial which says "You can’t claim for repayments of loans, overdrafts or finance arrangements."

There is a detailed list of what is and is not an allowable expense for the purposes of paying tax. You cannot seriously suggest that an expense being disallowed for tax purposes mean that the people who want to claim those expenses are no longer running a business. Using your logic, because (for example) the amount you can offset for fuel costs is limited that it means people who operate cars are not running a business.

da_rule

Unfortunately HMRC or any other government agency cannot define what a word means. All they can do is tell you how they interpret it for their purposes. And this can change depending on the specific purpose. So when it comes to National Insurance, HMRC don't consider it to be a 'business'. However, thanks to the case quoted in the second post, when it comes to interpreting the Chargable Gains Act, being a landlord is a business.

HMRC themselves admit that they give the same words or phrases different meanings depending on the situation (https://www.gov.uk/guidance/corporation-tax-trading-and-non-trading - under the 'What is Active' section). HMRC clearly state that the definition of 'active' in relation to corporation tax is not the same as the definition of 'active' used in other areas such as VAT.

In its purest sense, a business is simply exchanging goods or services for money or moneys worth with an intent to make a profit. As a landlord you are exchanging accommodation (service) for money (rent), which is hopefully enough to show you a profit after costs. You will also hopefully make a profit when you come to sell the property.

You may not consider yourself a business and instead feel that your property is an investment, but relying on one narrow, specific (in relation to National Insurance) interpretation of the word is not logical.

steampowered

MyOnlyPost wrote: »

Some people don't seem to get that some people simply don't want to buy a house either presently or ever and some people will never be able to buy a house for one reason or another, yet they all have to be housed. I also maintain all my houses to a good standard and comply with all regulatory requirements.

Members of the public pay you money in exchange for using your property, and in exchange for you maintaining the property to a good standard and complying with all regulatory requirements.

You are selling a service to members of the public. They pay you for that service.

In what world is that not a business? Presumably you are not doing it out of the good of your heart?

Arleen

steampowered wrote: »

Members of the public pay you money in exchange for using your property, and in exchange for you maintaining the property to a good standard and complying with all regulatory requirements.

You are selling a service to members of the public. They pay you for that service.

In what world is that not a business? Presumably you are not doing it out of the good of your heart?

Of course, once the house is paid off, mostly from the rents, he will donate it to habitat for humanity.

MyOnlyPost

Arleen wrote: »

Flawled logic LLC.
The money that pays your mortgage is not a loss. It's money paid towards an asset that you own. As you used that logical pole-vault in another post, I felt compelled to point it out.

No it's not, the repayment part of a mortgage is paid towards your asset, the interest is a finance cost. Most landlords buy property with interest only mortgages

itchyfeet123

MyOnlyPost wrote: »

... it is not classed as income from work... I fill out my tax return every year and if HMRC regarded my income as being from work my carers allowance would be stopped as I would be over the threshold.

Income from work =/= business ownership. I would have thought that was obvious; I get paid a salary, but that doesn't make me a business owner.

A business is an entity that provides goods or services to customers with the intention of making a profit (as opposed to, say, a charity or government organisation). Time spent on the business is irrelevant to the discussion of whether a given activity *is* a business, although it might matter for other things, like a carer's allowance in your case. It doesn't matter if what you're providing is iPads or ad space on your blog or a property to live in.

I'm puzzled as to why the semantics are important to you. Your argument is that LLs are unfairly villainised while bad tenants get less attention. I don't think that's true but it's not an unreasonable viewpoint. How on earth does your insistence that LLs are not running a business come into it?

Arleen

MyOnlyPost wrote: »

No it's not, the repayment part of a mortgage is paid towards your asset, the interest is a finance cost. Most landlords buy property with interest only mortgages

And how is paying interest on interest only mortgage not paying towards your asset?

MyOnlyPost

Arleen wrote: »

And how is paying interest on interest only mortgage not paying towards your asset?

If I buy an assett for £100k and pay interest only at 5% for 25 years I still owe £100k at then end of the term, so how is the interest paying towards the assett? It allows me to own an assett I otherwie couldn't have like anyone who has a mortgage

Arleen

MyOnlyPost wrote: »

If I buy an assett for £100k and pay interest only at 5% for 25 years I still owe £100k at then end of the term, so how is the interest paying towards the assett? It allows me to own an assett I otherwie couldn't have like anyone who has a mortgage

Would you have that asset without the interest payments? The tunnel vision is stong in this one me thinks.

da_rule

You can't define a business purely because of the tax relief they receive. Assessing the tax liabilities of any business venture is part of the decision making process. If I'm a builder trading as a sole trader then I can get certain tax reliefs on business loans. If my brother is a film producer he can also claim the relief but can also claim tax relief under the film relief provisos. Just because they can claim different reliefs doesn't make either one more or less of a business.

Also, charities. Charities, especially those that operate charity shops, are a business. They are selling items to make money. They get a wide variety of tax benefits. But they're still a business.