Working with a varied portfolio of clients, our multidisciplinary property group provides comprehensive and efficient property accounting solutions.
Our property accounting expertise
We have decades of experience of working with clients in the property industry and a varied client base. Our clients range from private individuals with property investments, landlords and architects to large property development groups.
Our multi-disciplinary team provides a wide range of accountancy and support services for property companies and those with property investments. In addition to the general accountancy and tax services we provide, we have developed a range of services specifically tailored to meet the needs of our property clients. These services include:
- tax planning, including:
- maximising Capital Allowances on commercial property
- group planning – for capital gains
- VAT planning
- international taxation
- acquisitions and disposals
- service charge audits
- strategic planning, monitoring and restructuring
- audit and other regulatory reporting
- outsourcing services; payroll; company secretarial; management accounts
Our VAT practice has over 25 years’ experience in advising clients in all parts of the property sector.
We help remove the burden of complex legislation and trying to avoid numerous VAT traps, leaving you to do what you are good at – running your business or managing your investment. Find out more about our VAT services for the property sector.
Property owners and tenants are now increasingly demanding a transparent, value for money property management service. Having the property service charges audited efficiently is part of this equation.
If you are a chartered surveyor or property manager you will undoubtedly deal with money from these service charges on behalf of your clients. We have an experienced team dedicated to certifying the statements of service charge expenditure. We have systems in place to deal with these audits and a proven track record of servicing numerous property portfolios.
The service we offer includes:
- Year end adjustments
- Journal posting
Our careful and efficient approach enables you to provide a seamless service to your clients and their tenants. We are able to respond quickly and provide a fast turnaround of work. We agree timings and fees with you up-front, so that you are in control. We also have the benefit of being able to draw technical support from our other specialist departments within the firm.
We have dedicated property specialists within our turnaround and recovery team that can offer you a specialist property service. Our team offers both lenders and borrowers support and advice on a wide range of issues, always attempting to find solutions that satisfy each party. Find out more about our property and asset recovery services.
Areas we specialise in
Over many years of experience in advising clients in the property sector, we have developed a range of specialist services. Areas in which we can help you or your business include:
The UK residential property landscape has changed dramatically over the past five years, particularly in relation to tax. From individuals looking to acquire a buy-to-let property, to businesses with large investment portfolios, most people have been affected. At UHY Hacker Young, we have extensive experience in advising on residential property.
The key aspects of residential property occupation and ownership are considered below.
Stamp Duty Land Tax (SDLT) on purchasing a property
Property purchases in England and Northern Ireland subject to Stamp Duty Land Tax (SDLT). In Scotland and Wales, separate taxes are instead due (Land & Buildings Transaction Tax for Scotland, Land Transaction Tax for Wales).
SDLT is charged at rates of between 2% and 12% for properties costing more than £125,000. It is the purchaser of the property who pays the tax. There are however reliefs available for first time buyers. Reliefs are also available where a portfolio of properties is purchased (known as multiple dwellings relief). We regularly find that these reliefs aren’t being claimed correctly (if at all), so please contact UHY if you would like to find out more.
Higher SDLT rates when purchasing an additional property
Where an individual acquires an additional residential property, or where a company purchases a property, additional SDLT charges of 3% may be due. There are reliefs available however e.g. if an individual’s main home is sold. Professional advice is recommended in order to correctly claim these reliefs.
For companies acquiring residential property, even higher SDLT rates (up to 15%) may be charged. Again, exemptions are available – for example, for properties used in a lettings business.
Restrictions on tax deductions for interest
From April 2017, tax relief for mortgage interest costs (for individuals) on residential properties is gradually being restricted for higher rate taxpayers. From April 2020, only basic rate tax relief will be available. For individuals wishing to build up a property portfolio using debt financing, this restriction of tax relief will severely impact profitability. Other structures may be better e.g. ownership of the property through a company, whilst also helping with estate planning. We can advise on the appropriate structure to suit your needs.
Annual Tax on Enveloped Dwellings (ATED)
Residential property worth more than £500,000 which is owned by a company may be subject to an annual levy of between £3,600 and £226,950 (for the 2018-19 tax year). Reliefs are available to reduce the ATED charges, however, an ATED return must still be submitted to HM Revenue & Customs to claim the relief. We can help with the submission of these returns and also in advising on the reliefs that are available.
Capital Gains Tax on selling a residential property
UK individuals are generally taxed at Capital Gains Tax rates of either 18% or 28% on the disposal of residential property. If the property has been their main residence however, relief may be available to reduce this capital gain. Usually, the disposal of a main residence by an individual will not suffer tax.
UK resident companies are subject to Corporation Tax at 19% on the disposal of property, however, if the property is charged to ATED (see above), tax charges of up to 28% may be due.
Inheritance Tax planning for residential property
Inheritance Tax (IHT) is chargeable at 40% on death on the value of assets held in the estate. A ‘nil-rate band’ (of £325,000) is available to reduce the value of the estate. From April 2017, an additional band of relief is also available in relation to an individual’s residence that is passed to direct descendants e.g. children and grand-children. The additional relief is £125,000 in 2018-19 and will increase to £175,000 in 2020-21. Where an individual ‘downsizes’, the additional relief may still be available on the value of the disposed property. The rules for the new reliefs are extremely complicated, therefore, professional advice is highly recommended.
In recent years, a significant number of UK tax changes have focused on residential property rather than commercial property. With lower tax rates, fewer restrictions and flexibility in the investment vehicle, commercial property investment in the North West is experiencing a significant period of growth. However, care should be taken when investing in commercial property in order to effectively claim reliefs that are due. At UHY Hacker Young, we have extensive experience in advising on commercial property.
Some of the key issues affecting commercial property investors are:
Stamp Duty Land Tax (SDLT) on the acquisition of commercial property
SDLT ranges from 2% to 5% for the acquisition of commercial property. It is the purchaser that pays the tax. In Scotland and Wales, similar taxes to SDLT are instead due.
Where a company owns the property, and the shares are acquired instead of the property being purchased directly, stamp duty at 0.5% will instead be due.
VAT on the acquisition of commercial property
There are many VAT issues to be considered when property is developed or purchased (see our VAT page for more details). At UHY in Manchester, we are able to provide specialist VAT advice to those businesses in the property sector.
For those investing in commercial property, capital allowances may be available to provide tax relief for fixtures and fittings within properties. For those purchasing or selling property, detailed attention should be given to the capital allowances position to ensure that the purchaser is entitled to claim capital allowances, and also that the seller does not suffer balancing charges on the disposal of the fixtures within the property. Further details can be found at our capital allowances page.
Entrepreneurs’ relief and commercial property
Where an individual disposes of shares in a company, if there is a profit on the disposal of the shares, he will usually be subject to capital gains tax. A favourable tax rate of 10% (entrepreneurs’ relief) is available where certain conditions are met. One such condition is that the company whose shares are being sold must be ‘trading’ for tax purposes. Where the company holds substantial investment property, this will not be the case. It may be appropriate to split the trading activities from the property ownership in this case to ensure that the 10% rate is available on a future sale of the company. We have significant experience in advising clients as to the ownership structure of their businesses, particularly in relation to property and can help you determine the best structure to suit your circumstances.
Inheritance Tax and commercial property
Shares held in unquoted trading companies will generally attract 100% business property relief (BPR) for Inheritance Tax (IHT) purposes. This means that where these companies are gifted, either during the lifetime of the donor, or at death, IHT should not be chargeable.
However, in order for BPR to be available, the company must be wholly or mainly trading in nature. Where significant property investments are held by the company, this may prevent BPR from being available. As for entrepreneurs’ relief, it may be advisable to separate the trade of the company from the property investment in order to ensure that IHT is not suffered on a gift or bequest of the company shares. We are able to advise on suitable ownership structures to help ensure that BPR is available.
Commercial property investment and pensions
Unlike residential property, commercial property can be held directly as an investment by a self-invested personal pension (SIPP). For those who own their own business, the premises from which the business trades could owned by a SIPP, with rental payments being made directly to the pension plan. For those wishing to undertake pension planning please visit our financial planning page.
From direct investment in ‘buy-to-let’ property, to complex commercial trading structures, at UHY Hacker Young, we have extensive experience in advising overseas investors in UK property.
Areas we specialise in
Our specialist team have assisted property investor clients over many years, from tax compliance to strategic planning. Some of the areas we specialise in are:
- Non-resident landlord registration – currently, UK letting agents or tenants are required to withhold 20% tax from payments made to non-resident landlords. We can help with registration with the UK tax authorities to allow these payments to be received gross.
- Preparation of UK tax returns and advice on deductibility of expenses – non-resident landlords are required to file UK tax returns if they wish to receive rental income gross. Filing a tax return also allows finance interest and expenses to be claimed. We can assist with the preparation of these tax returns and can also advise on which costs are allowable for tax purposes.
- Completion of Annual Tax on Enveloped Dwellings (ATED) returns – generally, where UK residential property is owned through a corporate body a ATED charge may be due and a return will need to be filed with the UK tax authorities. Reliefs are available to reduce the charge, however an ATED return will still need to be filed. We can help clients to claim the appropriate reliefs and to file the ATED return.
- Completion of Capital Gains Tax returns – non-UK residents are subject to Capital Gains Tax on the disposal of UK residential property. Disposals must be reported to HM Revenue & Customs within 30 days of the disposal, even if no tax is due. We can help with the filing of these returns and can advise on the taxes chargeable.
- Advice on new and existing offshore holding structures – historically, UK property has been held tax-efficiently through trusts and offshore companies. However, changes to the legislation have meant that old structures may no longer be tax efficient, particularly for UK Inheritance Tax. It is now more important than ever for those setting up new structures (or those with existing structures) to obtain appropriate tax advice.
- Advice on tax-efficient financing –interest payable on bank mortgages or private loan arrangements can be used to significantly reduce taxable rental profits. However, care must be taken to prevent interest payments from suffering unnecessary withholding taxes. This area has also become more complex following the phased reduction in tax relief on finance costs for residential property.
VAT and property
For those businesses operating in the property sector, VAT is one of the most important taxes to consider. Throughout the life cycle of a property, from design to construction, to the first grant of a major interest to renovation and disposal, the VAT implications should be understood.
Our local property team has specialist VAT capabilities within the property sector and can help steer you and your business through the complex legislation. This will help you to be both compliant with the rules and also claim any tax reliefs and exemptions that are valuable, thus maximising your returns.
Areas in which we can help are:
Many complications can arise when purchasing real estate. As a result, there are several things to consider when deciding on the correct VAT treatment.
The purchase of commercial land and buildings are generally exempt from VAT, however, the seller has the option of making the supply taxable by submitting an Option to Tax to HMRC. Furthermore, if a commercial building is less than three years old, the purchase will be compulsorily standard rated.
If you are purchasing a residential property, designed as a dwelling, the purchase will be exempt from VAT except for the first grant of a major interest, which is zero-rated subject meeting the relevant conditions.
There are additional complexities if you are purchasing a building that is used for a relevant charitable purpose or a relevant residential purpose.
The development stage
Particular attention is required when a new building is being constructed. Initially, you need to establish what the building is being used for. The use of the property dictates the VAT rates to be applied throughout the construction process. The VAT rates are applicable –
- Commercial buildings – VAT is chargeable at 20%.
- Buildings designed as a dwelling – VAT is chargeable at 0% on services in the course of construction of a dwelling.
- Relevant Residential buildings – providing a valid certificate is provided and other conditions are met, construction services may be zero-rated.
- Relevant Charitable buildings – the construction services provided in the course of construction of a relevant charitable building are similar to those provided when constructing a relevant residential building. They may be zero-rated provided that a valid certificate is provided by the charity and all other conditions are met.
When applying the zero-rating provisions, there are a series of conditions that must be met. Failure to do so may result in an alternative VAT rate being applicable.
There are always exceptions to any rule where VAT is concerned. Please find below the main exceptions to the zero rating when providing construction services –
There are a limited number of services that will always be subject to VAT at 20% regardless as to what is being built, the most common being professional fees. A way to avoid this would be to contract on a design and build basis with the construction company.
The zero rating extends to the renovation works on a dwelling that has been empty for a period of 10 years or more before the work commences. Evidence to support this is required and is available from the Local Council.
An extension or enlargement to any existing building whether it be a relevant charitable building, a relevant residential building or a building designed as a dwelling is standard-rated.
VAT on conversion
Particular rules apply when converting a building to a different use. By different use, this can mean changing the number of apartments within an existing development, making some units bigger and some smaller or changing the physical use of the building from commercial to residential.
The most common conversion is that from a commercial building into several dwellings. The VAT rate applied to services in the course of conversion is 5%. The reduced rate also applies to renovation works to a dwelling that has been empty for a period of two years or more immediately prior to the commencement of work. It is only the services provided in the course of conversion that attract the 5% VAT rate. All other goods and services will be taxable at 20%.
VAT on sale
The sale of a property can be either of the following: Zero-rated, Exempt, Standard rated or
Outside the scope of VAT depending on the situation. When selling real estate, VAT is possibly the most overlooked tax. This not only has the possibility of delaying the transaction, but may also result in the sale ‘falling-through’.
The type of property being sold dictates the VAT liability of the supply. Another important point to mention is that it is always the vendors responsibility to get the VAT liability correct. Failure to do so can result in HMRC issuing penalties and interest in addition to the assessment of VAT that has potentially been underpaid.
- The sale of the property typically reflects that of the purchase with the additional complications of the Transfer of Going Concern relief. Please find below a brief overview of the VAT treatment for real estate transactions –
- The first time sale of a building designed as a dwelling is zero-rated, with subsequent sales being exempt from VAT (unless the property has been empty for a period of ten years in which case zero-rating may apply).
- The first time sale of a building that is solely used for a relevant residential or relevant charitable purpose may be zero-rated provided that certain conditions are met. Subsequent sales of charitable buildings may be exempt from VAT or standard rated depending on whether or not the charity has opted to tax the building. With regards to relevant residential buildings, the subsequent sales are exempt from VAT.
- The sale of a new commercial building that is less than three years old is compulsorily standard rated. Properties falling outside of this will be exempt from VAT unless the vendor has opted to tax by submitting the relevant information to HMRC.
- Continuing with commercial properties, a common transaction is the sale of a tenanted property that has been opted to tax by the vendor. When determining whether the sale of a property rental business is subject to VAT the Transfer of Going Concern relief must be considered. If the relief applies to the transaction, the sale is not subject to VAT. It is considered to be outside of the scope of VAT. Various conditions must be met for the relief to apply to the transaction. If the Transfer of Going Concern relief applies, this will assist with cash flow and may reduce the SDLT due on the transaction.
Companies and businesses that have incurred expenditure on property may make substantial tax savings by reviewing their capital allowances position.
Tax relief for capital allowances is available on expenditure on property held as a fixed asset in the business’s accounts. Qualifying expenditure can arise on:
- Property constructed by the business itself
- New property acquired
- Second hand property acquired
- Enhancements, refurbishment, alterations and extensions to existing property
- Leasehold improvements
Over the past 10 years, capital allowances have changed substantially. The compliance burden has increased in relation to additions on fixtures; tax relief on industrial buildings has been removed; and a new category of expenditure on features integral to a building has been introduced. All of this means that businesses should reassess their capital allowances claims on existing properties, and review their position on property additions in order to maximise the tax reliefs that are due.
At UHY, we have considerable expertise with capital allowances. We work with specialist surveyors in order to identify the correct amount of relief to claim. We also advise on property purchases and sales to help steer clients through the complex capital allowances legislation. We can also work with clients prior to the construction of properties, ensuring that the appropriate documentation and information is in place in order to justify the capital allowances claim.
The next step
If you would like to discuss the accounting services that we can provide for your property business or investment, please contact one of our property specialists at your nearest location, or complete the contact form.