Is this a business?

HappyScotsman

I'm trying to settle in my mind if my late mother unknowingly ran a property business. I can argue myself either way.

HMRC have a page about renting property. In it it says:

Running a property business

You have to pay Class 2 National Insurance if your profits are £6,515 a year or more and what you do counts as running a business, for example if all the following apply:

• being a landlord is your main job
• you rent out more than one property
• you’re buying new properties to rent out

Ok, you can take issue with the above since it implies you have to keep buying to carry on being a "business" but that's a different discussion.

For my late mother, she owned an office building with a commercial tenant. The property schedule for the self-assessment was always filled out as income minus allowed expenses etc resulting in a profit or loss. All the transactions went through a business bank account, all the utilities are under commercial contracts etc. She used to draw a monthly income which more than covered 

However, for decades she owned a third share of a house with her brother-in-law and sister-in-law being the other owners. There is no rental income or expenses associated with it since the agreement was that her sister-in-law could live there rent free provided she insured and maintained it. I doubt there was any formal lease.

So do you think this forms a business or was she just fortunate enough to be an individual with investments in her home and two more buildings? 

tacpot12

Tricky. As you say, the residential property was not managed on a business-like basis, and I think you can ignore it in considering whether her other property formed a business venture or not. 

Because the other property was a commercial property, I would say that she was running a business, but what I think doesn't really matter. What matters is what HMRC think, and if they don't distinguish between residential property and commercial property, then your mother's rental of the commercial property appears not to be a business.

HappyScotsman

Yes, I think you're right about the other house. There was no intent to run it in a business like manner, and having partial ownership would make it near impossible to raise finance against.

I'll give HMRC a call later in the week and see how they view the office building.

I'm reminded of a discussion with insurers years ago when they wanted to increase the premium because they considered the cleaner to be an employee. The counter arguement was that the little old lady was a contractor since if she wasn't able to perform her duties, she found someone to stand in for her; her daughter.