USC On Rental Income

I have a number of rental properties and my accountant is now telling me that i have to pay the USC on the rental income from these properties, I dont pay tax on the rental income as i have a section 50 apartment so taxable rent is written off against the s50 relief, but accountant says I have to pay USC charge ?? even though the rental income does not cover the mortgage repayments

bricksguy said:

I have a number of rental properties and my accountant is now telling me that i have to pay the USC on the rental income from these properties, I dont pay tax on the rental income as i have a section 50 apartment so taxable rent is written off against the s50 relief, but accountant says I have to pay USC charge ?? even though the rental income does not cover the mortgage repayments

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This is why the USC exists, to levy "income" that otherwise wouldn't be liable - without knowing the exact facts and figures no-one can say for certain whether your accountant is right, but assuming you do have taxable rental income (i.e. rent less allowable deductions - which includes 75% of the interest rather than the entire mortgage repayment) that would be taxable but for the S.50 relief, then I would imagine he's right.

do i still have to pay the usc even though the properties are all loss making and i am topping up the mortgage payments every month

yes

bricksguy said:

do i still have to pay the usc even though the properties are all loss making and i am topping up the mortgage payments every month

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You aren't distinguishing between a profit/loss for tax purposes, and a cash flow to you personally.

While the mortgage repayment, NPPR and various other outflows may result in a negative cash flow, for tax purposes, only 75% of the mortgage interest is allowed as an expense, and the NPPR is not allowed, so while you may be subsidising the mortgage repayments with money from elsewhere, you may still have a taxable income within the year that will be subject to the USC (but not give rise to income tax, due to losses forward / capital allowances...).

Agree with the other posters - think about it logically - the s.50 property is a tax shelter.

The government (and last one) have introduced taxes that mitigate these shelters so as to bring more income under the charge of tax. that is what the USC does.