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Rental income via a property management company

I have a client with a portfolio of 12 properties. Over the last 2 to 3 years the properties overall have started to generate a reasonable net income of about £20k PA. He also has a healthy employment salary of around £100k PA and not only is the net rental income attracting 40% tax, it's also reducing his personal allowance altogether. The problem is, his partner to whom he lives with (not married) only has a very small salary - barely enough to even use her personal allowance each year! I was wondering if there was a way to divert the rental income through some form of Property Management Company if I were to appoint them both as directors and shareholders, in order to divert at least some of the income to the partner, by way of an additional salary or dividend to reduce the overall tax charge? The properties are all currently in his name, would this need to change? Some advice on this would be gratefully received! 

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Market Value Transfer

This could be solved by a transfer of the ownership of the properties either into joint names or the company route as suggested.

The problem is both would be treated as market value transactions for capital gains tax purposes resulting in a gain taxable at 28% on your client.

Further a transfer of the properties to a company would also result in a SDLT charge (subject to the linked transactions rules). A gift to his partner would be free from SDLT as there is no consideration (assuming no mortgages are also put into joint names).

A further possible solution could be the partner becoming either an employee or a self employed property consultant paid a wage or fee for management of the property portfolio?

Ford

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Thanks very much for your sound guidance and advice on this one. I take on board everything you say regarding the CGT implications and it strikes me that your latter suggestion sounds like a "less complex" solution. I wonder what would be considered as a reasonable wage/fee to charge for managing the properties, without the overall set-up looking "artificial"?

Thank you once again ...

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