There are two major property-related changes in the Budget statement which will affect “buy-to-let” investors in residential property (whether in the UK or oversea). Investors in commercial property are unaffected; as are investors in furnished holiday lettings.

The first change relates to “finance costs” such as mortgage interest, interest on loans to buy furnishings and fees incurred when taking out or repaying mortgages or loans. Starting from 6 April 2017 (and phased in over 4 years) tax relief for these costs will be restricted to the basic rate of income tax, this restriction applying to individuals only. Instead of deducting finance costs from rents to arrive at taxable profits, landlords will instead receive tax relief by deducting an amount equal to tax at the basic rate on the finance costs from the tax chargeable on the profits.

The second change relates to “wear and tear” allowance for furnished lettings. This applies to companies as well as to individual landlords. At present, the costs of replacing furniture and fittings are not tax-deductible. Instead, a notional deduction is given for tax purposes equal to 10% of rents. From April 2016 the 10% deduction will be abolished and instead tax relief will be given for the actual costs of replacements. This change does not affect tax relief for expenditure on routine repairs to the property, including furniture and fittings in it, which will continue to be tax-deductible in full.

It’s tempting to think that if a car is generally available to anyone who needs to drive it, it must be a pool car and therefore not taxable as a benefit in kind on anyone. Tempting but, sadly, not often true. To be exempt, the car must be one which is

– Actually used by more than one employee or director
– Not ordinarily used by on employee or director to the exclusion of all others
– Not normally kept overnight at or near the home of a director or employee (except where it’s kept overnight on premises occupied by the employer)
– Not used by anyone for private (including home-to-work) travel at all (except for private use which is “incidental” to business use, such as taking a car home overnight in readiness for a business trip starting very early the next day)

The rules are strict and are notoriously strictly applied. Be prepared to prove, if challenged, that they are met.

FRS 102 defines investment property as property (which can include land or only part of a building) held by the owner or by the lessee under a finance or an operating lease to earn rentals or for capital appreciation or both.

SSAP 19 required investments properties to be carried at open market value with no depreciation, whilst FRS 102 refers to fair value (with no depreciation); although this change in wording will not lead to many differences in practice.

Under FRS 102 where there is a mixed use property, the fair value of the proportion of the area let should be quantified and accounted for as an investment property. So this will be one property with an element of it being depreciated and held at cost (being property, plant and equipment) and another element being held at fair value and not depreciated (being investment property).

Gains or losses on investment properties will be recognised through the profit and loss account in future, rather than through the Statement of Recognised Gains and Losses. It will be necessary to keep track of these amounts as they will not be distributable reserves.

When setting up a company it is easy to assume that a bright future lies ahead.

You have a great, profitable idea and you have chosen a business partner you trust. So what could possibly go wrong? A shareholder agreement will protect you from arguments resulting in costly and acrimonious legal battles that could leave you with nothing – in effect, a business pre-nuptial agreement.

Some key reasons for setting up a shareholder agreement are as follows:

1. The shareholder agreement sits alongside the company’s articles of association, which includes the main provisions defining how the company operates. However, the shareholder agreement can be more dedicated to the particular needs and concerns of shareholders. It is also a confidential document as it is not a public document, unlike the articles of association.

2. You can reduce the potential for future disputes between shareholders. The shareholder agreement defines how decisions should be made and outlines the responsibilities and obligations of different parties. If a dispute does occur, it can include procedures for dispute resolution which is a cheaper alternative to legal action.

3. The agreement can force shareholders to give up their shares when they cease to be a director or employee of the company, if they die, if they are made bankrupt or they breach contain terms. It can also stipulate how the shares are valued in such circumstances.

1 Prepare a business plan
A robust business plan helps potential investors understand the vision and goals of the business, and brings focus to management’s understanding of the business strategy.

2 Do your research
The funding landscape has evolved considerably over recent years; think about how appropriate and attainable the various forms of finance may be.

3 Utilise tax-relief
When seeking investment your business may wish to make potential investors aware of three HMRC tax relief schemes – the Enterprise Investment Scheme, Seed Enterprise Investment Scheme and Venture Capital Trust Scheme.

4 Invest in management
A strong management is the backbone of a successful company. Businesses with a full management team and advisory board in place will increase investor confidence and become more attractive investment propositions.

5 Manage your cash
Before seeking external capital, it is vital your business is managing cash effectively. A weekly cashflow forecast is essential, as is an understanding of the volume of cash and working capital required to grow.

6 Use external advice
In the early stages a business is likely to require outside advice to ensure that it is ‘investment ready’. Sources of advice include trade associations, such as ICAEW, whose Business Advice Service offers micro businesses free advice.

7 Set realistic targets
Ensure your business sets realistic KPI and milestone targets that can be relayed back to investors. Doing so will help you implement your business plan as you grow, and help investors monitor the progress of their finance.

8 Work with investors
In some investment circumstances, such as receiving equity finance, growth businesses should be aware that investors may wish to input into the strategic direction of the business.

9 Know your market
A review of the potential upturns and downturns in your respective market needs to be carried out and their impact assessed. Doing so will ensure your business is prepared for any unforeseen market developments.

10 Be flexible
Your business plan may have been produced when the business was little more than an idea. Circumstances change, so you must ensure you make regular fresh assessments of where your business is and what new challenges you may face.