Joint property rental
I have been instructed by a friend of mine (why are they never easy!) who owns some rental property jointly with his 3 siblings. I was going to complete the usual Land and Property section and tick the jointly let box; however, a couple of issues occurred to me.
- There is actually 3 properties owned and intention to purchase at least one further property.
- Their intention is to retain any funds within the (separately set up) bank account to potentially purchase the further property. i.e. intention to make a profit
- There is a legal partnership agreement written up by a solicitor. It includes a key paragraph stating 'the parties shall be partners in the business of buying residential properties for the the purpose of letting'
I believe therefore that these factors would constitute a business and in fact we should be preparing a partnership tax return. To do this I will need to get a partnership UTR.
I also assume therefore that I ought to be preparing a set of partnership accounts, including a balance sheet showing the cost of properties and mortgage creditor etc?
My final assumption is that the profits should be taxed as Self Employed pages rather than on Land and Property. This therefore means a potential Class 4 NIC liability.
Reviewing HMRC guidance and tax books it seems that for joint property to be a business is rare; however, I still feel that the factors mentioned do create this scenario.
I would appreciate peoples comments on this and also whether there are there any other potential factors/ issues I need to consider?
- Is Xero payroll as rubbish as I suspect it is? 1,081 20
- QBO VAT box 2 and 4 120 1
- VAT - Check on clients business 597 25
- Transfer of a trade WITHOUT assets? 113 1
- Amend a 2010/11 return 113 1
- Advanced SMP, but employee returns to work early 165 1
- How to deal with prior year error 161 2
- Repaying Directors Loans within 9 months 531 19
- Bookkeeping Rate of Pay 2,340 33
- What's the Barmiest Reason A Client gave you for going? 2,050 20
- Tax Calculations 657 10
- Tax Fines - HMRC 409 4
- Exemption from CGT 239 2
- VAT Registration 248 3
- Digita Users - Can you please confirm? 467 14
- Autumn statement predictions 439 8
- ACCA Practising Certificate Holder 344 4
- How to claim relief under a Double Taxation Agreement 193 3
- Moneysoft error 436 7
- Repaying Directors loan by transferring an asset 649 26