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?
- Letter from HMRC telling me client passed away 1,623 23
- HMRC Penalties - are they enforceable? 91 6
- Anyone use Xero for estate agent clients? 77 1
- Who can I refer leads to? 241 6
- Companies House 282 4
- RTI - EPS - ??? 99 2
- Contractor/ Ltd Co/with pension 99 2
- Minutes & Dividend Vouchers 330 9
- Non-reporting of BIK - income tax liability 109 1
- I hate HMRC's voice recognition system - The Inept Interrogator 211 6
- PAYE Refund Farce At HMRC 665 8
- Can a director pay for their childs tuition through the company 653 14
- Benefit of my ACCA membership to my Non Qualified Employer 139 1
- Donaldson v HMRC - result?? 672 7
- Can a sole trader carry back losses to reclaim some tax paid from previous years? 486 5
- Director self assessment 407 16
- SA tax assessments 169 2
- Sage Import Data 179 4
- Late payroll submission on sage 240 2
- Dividend Vouchers 288 4
- DTR : TIOPA 2010 Section 42 432
- CTA study material 391
- Sect 102 TMA 1970 290
- Sage Forecasting - Print filename 268
- Pre incorp expenses 243
- Relief on French Tax Deposit? 218
- Anyone have clients that use Pay4Later to offer customers credit? 212
- Slight twist on employment related securities 197
- How to claim additional losses after mistake in CT return 146
- What is the tax position if I am working overseas but via a UK agency? 143