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?
- How will auto enrolment affect accountants? 1,615 42
- VAT chargeable to conference attendees 48 1
- CT return error message 314 9
- Flat Rate VAT and EU sales (Non VAT) 54 1
- Should the Report of the Director be included in the interim financial statements of a small company 43 1
- Audit rules 342 8
- Moneysoft Payroll Manager 221 6
- Capital Allowances on Furnished Holiday Lets Business 283 7
- Slipped out of the self assessment radar 184 1
- How to prove income for a mortgage if you have no SA302s 780 11
- Inheritance Tax and Capital Gains Tax 158 2
- FRS17 query 197 2
- Anyone Heard of This Outfit? 931 6
- Charge HMRC 196 2
- Purchase of shares and goodwill 475 17
- If I repay my Directors loan, will I haveto pay tax on the profit ? 2,104 25
- Stopping trading and de-registering for VAT 361 8
- VAT 185 2
- Group subcontracting - accounts not consolidated 84 1
- Shareholder/Directors termination payments 185 2
- Xtuple 539
- Qtac payroll for bureau 368
- Confused - Professional Association a Mutual trader, or not? 308
- Industrial & Provident Societies 305
- Why would HMRC offer to close an investigation by contract settlement 259
- CIS schemes 198
- Domain name sale and limited company 195
- Investment 178
- Director legal fees in loose connection to the company 169
- Italian friend wants to set up a UK company to reduce taxes 165