Q. If there is rollover relief on the sale of investment properties, can the money then be reinvested in a business?
A. If your rental houses are qualifying furnished holiday lettings (FHL), then you could sell them and reinvest in a qualifying business asset. This is due to the ‘replacement of business assets (rollover) capital gains tax relief’, which can be seen in HMRC’s Capital Gains Manual at CG60250C. See CG60287 refurnished holiday lettings. But besides FHLs and compulsory purchase situations, there is generally no rollover relief on the disposal of investment properties. In the 2024 Spring Budget the Chancellor announce that the special rules for FHLs are being abolished from April 2025.
Q. Can I pay my wife a management fee for managing our rental property?
A. If you look at HMRC’s Property Income Manual at PIM2210, it states: ‘A landlord can deduct any wages or salaries they pay to their spouse, civil partner or other relations for working in the rental business provided the amounts paid represent a proper commercial reward for the work done. The spouse, civil partner or relative will be taxable on their earnings if their income is large enough.’
Q. Are any taxes payable if I leave my property to my son?
A. If the individual’s estate is small enough so that including this property in their death estate will not result in any inheritance tax, then the most tax-efficient way to leave this property to their child is just to leave it to them in their will; in other words, wait until death to transfer. There is no capital gains tax (CGT) on death, so any potential capital gain is ‘washed out’.
If that is not the case, there is a strategy that works in a small number of cases. See section D19 on page 53 re ‘gifts between spouses’ on HMRC’s general anti-abuse rule guidance (https://tinyurl.com/GAAR-D19-p53).