Buy to let property for husband and wife

Buy to let property for husband and wife

Didn't find your answer?

Hi everyone

I have a husband and wife who a few years ago moved house (as the husband moved into a house that accompanied his job).

They residentially let out their old property and I have been completing a tax return for them to split the profits 50/50 as required.

Recently (having inherited some money) they have made the decision to acquire a further property, but this time specifically to let out.

My question is that as it is a buy to let, am I correct in thinking that a partnership is still not required to be formed?

The new property will be again let residentially.

Cheers

Replies (5)

Please login or register to join the discussion.

avatar
By User deleted
28th Oct 2015 13:00

According to the HMRC manual, it depends.

Thanks (1)
By johngroganjga
28th Oct 2015 13:08

I think you are asking the wrong question.

The first question should be: Is there a partnership? From what you say there clearly is.

The second question should be: Is this a partnership that should be registered as such with HMRC and submit partnership tax returns? The answer to that question is probably no as HMRC have their own definition of partnerships which excludes most partnerships whose only activity is property investment.

So yes you have a partnership (you don't need to "form" it as your client have already done that themselves) but no you probably don't need to register it as one with HMRC.  

Thanks (2)
Replying to richard thomas:
Portia profile image
By Portia Nina Levin
28th Oct 2015 13:38

A small step for man

johngroganjga wrote:

The first question should be: Is there a partnership? From what you say there clearly is.

Now that is a leap that Neil Armstrong (good lucj Mr Gorsky) would be proud of John. PA 1890, sections 2(1) and (2) are clear that such giant leaps should not be made.

HMRC leap, by default, in the opposite direction, according to http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm

 

Thanks (0)
avatar
By davidbarry
28th Oct 2015 13:32

dear john

Dear John,

What a brillant summation and answer to a problem.

Thanks (0)
avatar
By DMGbus
28th Oct 2015 13:33

PIM1030 guidance - jointly owned property

It is worth a read of PIM1030 (HMRC guidance).

http://www.hmrc.gov.uk/Manuals/pimmanual/PIM1030.htm

In my experience (and HMRC's per PIM1030) most jointly owned properties are not part of a formal partnership:

Jointly owned property

Where property is owned jointly with one or more other persons the way the rental income is taxed depends on whether the letting is carried on in partnership. Joint letting does not, of itself, make the activity a partnership.

Usually, there won't be a partnership and the taxpayer’s share from the jointly owned property will be included as part of their personal rental business profits.

Less commonly, the joint letting may amount to a partnership. If this is the case the share of the profit or loss must be kept separate from any other letting income. A partnership loss can't be deducted from a personal rental profit and vice versa.

---------------------------------------------------------------------------------------------------------

In recent years I have only come across one jointly owned property letting being treated as a partnership requiring SA800 etc.  When I queried that case I was told that it started out as a farming partnership and transfiormed over the years into being now purely a letting business (letting just one property as it happens).

Thanks (0)