Property Flashcards
What is rent a room relief?
when letting furnished rooms in your main residence - if claiming you must also live there
No tax if gross rent below £7,500
One per residence
What is Property income allowance?
£1,000 - no tax due for individuals
If income over £1,000 can either deduct from gross income or deduct actual expenses
Can’t use as well as rent a room relief
What issues are there with commercial property?
Slow sales and purchases
Not easily divided to segments
Difficult to analyse market
How does commercial property historically perform?
Value follows cyclical pattern - usually opposite to equities and sometimes residential property
Benefits of indirect property
Diversification
More liquid
Tax efficient in ISA Pension
Gearing risk reduced
Why might property OEIC have a high cash holding?
In demand - new fund flows
Tactical position
Pending property purchase
Recent property sale
Rental to be distributed
What is a REIT?
Investment trust in Real Estate
Investment company on stock market
Ring fenced property letting part 75% profit must come from this
90% pay-out of profit as dividend on rental part within 12 months
Ratio of 125% of rental profits to cost of interest
At least 3 properties with no one property valued at more than 40% of total
What is the tax treatment of a REIT for the investor?
Ring-fenced part - Property income paid net of 20%, can be reclaimed by non-taxpayer, ISA, pension
Further liability for HRT/ART
Non ring fenced part - Treated as dividend income, can’t be reclaimed
CGT on gains - for both
Tax treatment of REIT on the fund?
No corporation tax on ringfenced section
Corporation tax on other activities
