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?
- Paint Manufacturer Flat Rate Scheme 141 4
- Accountants' Error 693 13
- ICPA taxwise fee protection 144 3
- Scoot 183 4
- Zero Rated VAT on New Building 152 2
- Tax code for Companies House fees 199 3
- G'day IPA-IFA 661 11
- Why do HMRC have a different FPS liability to the amount I sent? 1,453 20
- VAT customer is registered in France, goods shipped to the UK 109 1
- Regaining my qualification 200 2
- Self-Assessment - NIC Exemption 235 2
- Recommendations for tax advice sole practitioner 232 2
- Auto enrolment 192 3
- Shareholder agreement 172 3
- Tax treatment of cashed in American Savings Plan 195 3
- Company Reorganisation 164 3
- Employee Loan 207 2
- IRIS - Personal Tax - 2013/14 - Page UKP2 465 15
- Statutory residence test - transit days 595 5
- CGT - Is a calculation required now? 150 1
- Skandia using wrong address 1,450
- Nil Rate Band Trust - index linked debt by way of charge over property 764
- Any views 698
- HMRC Employers Diary 523
- International interest certificate 424
- Stamp Duty on share for share exchange 389
- Sale of business 355
- NOVA 259
- Advertising services? 254
- IRIS Open Books problem 248