The expenses will be repaid from profits and are quite seperate to capital introduced which remains owing to the person who introduced it and is nothing to do with the other partner?
They seem quite high expenses. Are all of them actually expenses or is capital expenditure being mixed in there?
Do all expenses pass the test of being wholly, necessarily and exclusively incurred for the purpose of the business.
One thing to be wary of is that if no profit is ever expected then the enterprise would fail the test of being a business but would rather be deemed a hobby for which no expenses would be allowable.
Just something to watch out for there.
Considering the amounts involved it may be a good idea to look at talking with a local Chartered or Chartered Certified practice who may be able to ensure that you are not making any costly mistakes (whether as a one off excercise for advice where they are able to look at all of your books and records to guide you going forwards, or as the long term representitive of your business interests).
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
We have a block of 12 flats, it's money spent renovating.
Anything I buy goes on my credit card account and likewise with my partner.
As it's 50/50 he owes me £20k and I owe him £5k.
I assume we would be introducing capital to pay for materials used for renovating.
It's not a limited company, but I assume "we" owe the company £50k, so when we look to pay off the credit cards we need to introduce capital to do this.
We both receive income from renting the flats which is shown as drawings.
Hi Michael
Ive seen a few of your posts now and (to me) they seem to be geared to how you arrange things in sage, when Im also reading between the lines that you need some fundamental accounting and tax planning advice. I know from an earlier post that you had property investments with your wife and that you indicated the share structure wasnt all 50 /50 and now you talk of someone else being involved in the flats. I hope you dont mind me pointing out that these shouldnt all be set up in the same sage. Plus when you say the rental income are shown as drawings, Im assuming that this is also being shown in sage as income. You did also mention about making losses due to your expenses and now mention the word expenses in relation to items paid on your credit card. But are they actually expense items? Should they be in the P&L at all or as Shaun indicated in the balance sheet. Care re renovation works on the tax front is needed. There are very strict rules in this regard and big implications on the taxes front if you dont get this right from the start. Also - just a thought do you have a partnership agreement set up?
I concur with Shaun about getting advice from a suitable accountant, not least with the amounts involved, but with the more complex structure you seem to be putting in place and given the potential issues on the tax front and ensuring there is absolutely no confusion over the fundamental questions/assumptions you are asking/making. Its commendable you want to understand the numbers behind the business and how it affects how you do business, I only wish a few more of my clients would be like that, but there are times when you need to use the services of professionals and this is one.
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Joanne
Winner of Bookkeeper of the Year 2015, 2016 & 2017
Thoughts are my own/not to be regarded as official advice,which should be sought from a suitably qualified Accountant.
You should check out answers with reference to the legal position
I agree with Joanne, given the amounts involved it would be daft not to have an accountant on board, ideally someone with sufficient knowledge in property accounts. It's my opinion it will save you more than the fee that the accountant will charge.
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John
Any advice given is for general guidance and professional advice should be sought applicable to your circumstances.
As further examples, will you be reporting under FRS105, FRSSE or FRS102? Investment properties are treated differently under all three.
Tax laws are changing around mortgage interest.
Have you considered your exit strategy from the property that will give you the lowest capital gains debt?
Are you in the optimal legal form for the enterprise?
Twelve flats is a serious financial commitment. You will have had no qualms about paying a surveyor and Lawyer during the process, but the one person whose whole reason for being is to ensure that you make the optimal financial decisions you seem to have left out of the process.
Joannes excellent post really hit the nail on the head and as John says you need someone on board in your corner who knows property accounts not least as there are changes occuring in 2015 and 2016.... Actually, thats true of all elements of tax but investment properties seem to have been singled out.
As I say above, the criteria that I would attach to the experience in property is that they are also a chartered, chartered certified practice and/or a chartered tax practice (for England and Wales ICAEW, ACCA, CIOT. Letters to look for after their names are ACA, FCA, ACCA, FCCA, CTA (the F denotes 5+ years post full membership experience on top of their pre membership experience (which will be at least three years))).
Top table accountants can be expensive so get a quote first. If you can, talk to other local property investors to get some feedback on who locally is the best person for your market and most devoted to their clients. If at your first meeting with them you find them a little scary rest assured that so will HMRC.
I wish you the very best of luck with your property business and your posts have always been interesting but for your best financial interests considering thje size of your portfolio now, you must get an accontant on board with your venture (and prey that any mistakes made in setting up the venture can be unwound so that your eventual exit strategy is not disadvantaged).
Keep us all informed as to how you progress with finding financial representation won't you,
kindest regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Thanks everyone for your responses, I really appreciate all the good advice, sorry for delaying coming back, I've been on holiday.
I'll try and respond to questions in order.
I did seek advice from an accountant a few years ago specialising in rental properties, his advice to me was "do it yourself, I can't add any value"
Whilst that is flattering I'm not naļve enough to think I know it all, far from it. But I do take the time to ask when I don't know, which is why you see my questions popping up
But that said my portfolio was much smaller then, I now have 20 flats in total. So might re-think this. Maybe I'll prepare my accounts and get a review. My thought is as long as accountant saves me more than he charges I'm happy.
I have two partnerships, one with my wife and one with a business partner, both are separate in sage. (I run 2 versions)
I have been careful not to confuse Capital with maintenance and allocate appropriately in sage.
I am aware of mortgage interest relief changes.
I'm not worried about Capital Gains, my plan is to never sell, when I die in maybe 40 years I'm sure it will be very different than today, so I'll look at this closer to the time.
So..... I thought I was okay until you hit me with FRS105, FRSSE and FRS102 what the hell is this?
Ignore it. For some reason I thought that you were incorporated but you are saying that you are self employed (a partnership just being a collection of self employed individuals).
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
