Income from letting property

Income from letting property

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I am preparing limited company accounts for a new client for the first time, her old accountant having retired. She is sole director and shareholder of the company who's business is run from premises owned by her husband. There is no lease agreement and no rent paid by her to her husband. One of the rooms is let a number of days a week to a third party and the income from this has always been put through the limited company accounts as rental income, the argument being that she has loss of income whilst this room is in use by someone else. In my opinion, this income is proper to the husband who is a 40% taxpayer and I don't understand why the previous accountant has done it this way. Is anyone aware of any legislation that would allow this income to be taxable on the wife's limited company?
KB

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By AnonymousUser
29th Mar 2006 09:59

imho
i agree with you, that the income is due to the husband, particularly given the argument that the Ltd is not making as much due to the rental of the room, ie if the Ltd was renting the room, then they would turf the person out as early as practical to pursue the most profitable opportunities.

Does the room-renter have a lease agreement with anyone? I don't want to sound really cynical but is cash changing hands for the rent?

The way I see it would make sense for the Ltd to receive the rental income would be if there was a lease agreement to the Ltd for the whole property.

I take it the current setup means less total tax is being paid than if the rent was paid to the husband?

anyway don't take this as gospel, it's just my opinion on the situation.

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