Question:
I own a rental property, and am thinking of setting up a limited company and calling it the management company of the rented properties. If I were to pay the management company fees and make no profit at all would I just pay corporation tax?
Arthur Weller replies:
If the company management fees reduce your personal profits to nil, then you would not pay any personal tax. The company would pay corporation tax on its profits, as you have written. However, you must realise that your company’s management fees can only be offset against your personal rental income if they are reasonable and commercial. Only then will HMRC accept them - see the end of page www.gov.uk/hmrc-internal-manuals/property-income-manual/pim2080.
