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?
- Freehold Property Depreciation 28 1
- We contribute a percentage of employees' salaries to a pension scheme set up by them - do we need to get involved in auto-enrolment? 42 2
- VAT margin scheme 49 3
- Closing down - who should buy whom? 504 27
- Auto-enrolment drivel 673 11
- Late Filing SA due to property income, individual was also a non dom for 15 years 82 6
- Client information from previous accountant 371 7
- Tax and NI on payment to overseas employee 207 4
- Shares paid - petty cash 83 3
- Two questions re client meetings and TR Fees 508 9
- SA302s - Lenders to accept non hmrc copies 882 16
- cold file reviewer needed 257 2
- Property jointly owned by non married joint owners 72 1
- Auto Enrolment costs by payroll outsourcer 447 3
- Subcontracting accountancy work 228 3
- AAT or ATT 156 2
- Profit & Loss accounts filling when tax is withheld overseas 53 1
- VAT flat rate scheme 270 4
- Unpaid Fee's 498 8
- IHT on offshore settlement 125 1
- Possible Partnership? 526
- Lunatics in charge of the asylum - Bluestone 508
- Tax and accounting treatment on long lease granted from freehold 472
- New Fangled Penalties 321
- Clubs and Taxable Income 269
- Deferring taxable income until after 5 April 266
- Purchase of property freehold - capitalisation of costs 262
- Loans to other companies 204
- Closed PAYE schemes and auto enrolment 179
- English Company Owning Property in Scotland 173