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05 August 2014
Advice required on the tax-efficient structuring of a new letting business
A husband and wife have a small farming partnership which runs at breakeven. The husband has earnings from a separate employment that take him into the 40% tax band and the wife has no income.
They have obtained planning permission to renovate and convert two old farm cottages into holiday accommodation. This will cost about £300 000 plus VAT and will be funded from savings. Letting agents estimate that they could receive gross income of between £80 000 and £100 000 a year from holiday lets.
My clients have asked me to consider three things.
- They want to recover their £300 000 tax-free.
- They want to reclaim the £60 000 VAT.
- They do not want to pay higher-rate tax on the holiday income.
The properties are owned jointly by the husband and wife but are not recorded...
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