i bookeep for a friend who initially had a property rental business, however he has now also started to buy property for renovation and sale. If he sells on average three properties per tax year he will make a profit of around £90k, however he reinvests the profit each time as the deposit for the next property. He doesn't want to become a limited company because he buys the properties on a buy- to - let mortgage even though he doesn't let them ,but this means that the mortgage providers he uses won't let to limited companies.
Does he have to pay tax on £90k plus his rental income or can it be classed as an an expense when he uses it for the deposit on a property. I have contacted HMRC but they just directed me to online information that didn't really answer the question and obviously the answer will make a huge difference to the tax that is due.
For the amounts you are mentioning, its worth him visiting a tax specialist.
From what I understand, buying and selling multiple houses is trading activity. Where a house has been purchased and is mid way through work at the year end, its been shown as work in progress on the profit and loss, to carry into the following year, where hopefully it will be sold... rather than an asset on the balance sheet. I imagine this might have some effect on what you can do, but I am not entirely sure, so best to speak to someone.
