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I just read that an owner occupied property can not be treated as investment property and that it must be treated as PPE
My questions
1. What if the company shows that the owner is paying a rent on the property? Would the property than be classified as investment property?
Let’s assume the rent paid is at market rate.2. What if the company shows that the owner is given a property as part of a benefit of being the manager? And so in a way he isn’t getting the property for free but he is getting it because of his employment at the company.
Hi,
If you own the property and occupy it as part of your business operations then why would you be paying rent on it? Surely if you were paying rent on it then you are paying rent to yourself, which doesn’t really make much logical sense regardless of if it is at the market rate.
And I’m not too sure that I follow the second point sorry. Can you elaborate please?
Thanks
1. Well yes I would be paying rent to myself and even if it doesent make logical sense, wouldn’t it allow the business to treat the property as an investment property?
2. I am trying to ask about loopholes around the standard. To be able to class a property as an investment property.
So if for example company A has some properties it has bought because the company has predicted that the value of properties is about to go higher. And the company doesent want to charge depreciation on those properties and so they have classified the properties as investment properties.
The company (or rather the owner) then intends to make use of the properties and feels that he should move into the house.
However the owner still wants to classify the property as investment property.So in order to classify the property as an investment property, and at the same time be able to occupy the property, can the the company show that the owner is not occupying the property as the owner, but rather he is occupying the property as a manager because him, as the manager of the company, gets to live in the property.
Hi,
1. No, the business cannot treat it as investment property as it is using it itself.
2. There are no loopholes, if people try to find loopholes then it is likely that they are not following the rules and are therefore may be acting unethically. In your situation here is sounds like the property is IP but there would need to be a RPT disclosure note.
Thanks
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