Rent expenses question

Rent expenses question

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A client asked me this question this morning - immediate reply was no and then I had second thoughts.

2 properties jointly owned. Wife has no other income; husband pays tax at 40%. Property owned 50/50. No pre purchase tax planning requested or done - they have owned them for a year without telling me!! Wife does day to day management of properties, cleaning common areas etc etc. Can she charge a fee say £1000 against the total property income thereby moving some taxable income from husband to her.

It sounds like one of those questions you get asked in the pub - am I missing the b obvious in my second thoughts?

Replies (8)

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By josephc
13th May 2015 11:11

 

 

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Replying to Locutus:
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By josephc
13th May 2015 11:17

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Stepurhan
By stepurhan
13th May 2015 10:54

Cannot profit from self

For the same reason a sole trader cannot bill their sole trade for doing all the work of the business. You cannot reduce your own taxable profits, which is what the charge by the wife to the property partnership would be trying to do.

The link you provided is an online forum that has one anecdotal case, with no reference, from an unidentified person claiming they have done so. That is hardly a reliable basis for saying that individuals have successfully charged going rate for their own services. 

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By andy.partridge
13th May 2015 11:00

Agree with Stepurhan

Furthermore your link was nothing to with claiming a deduction on a tax return, it was about making a claim against a tenant for damages. Apples and pears.

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By yorky1000
13th May 2015 11:18

Not profiting from self?

We would declare the £1000 as wife's self employed income so there is no effect on the total taxable profit - its just split into s/e and rent. The wife would have taxable income of £1K plus the rents - but effectively no tax due because of her personal circumstances. The husban'd share of the rents drops by £500 at 40%.

I can't get my head round whether the wife can bill the joint owners one of whom is the wife. 

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By johngroganjga
13th May 2015 11:33

Surely this is just a prior allocation of profit to reflect an unequal contribution - happens all the time.  The question of the wife "billing" for that share is a bit of a red herring - just as any partner "billing" the partnership for their profit share is also a red herring, not to say nonsense.

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Stepurhan
By stepurhan
13th May 2015 11:35

A sham

Does the wife have a separate self-employment of property management already? Because creating a self-employment solely to bill a partnership that she is part of will be viewed as a sham to save tax. Quite rightly since that would be exactly the reason to do this.

In any other partnership you would adjust the profit split to reflect the additional effort put in by one partner. You cannot do that with a husband and wife partnership because profit splits have to reflect the beneficial interests for those.

 

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James Reeves
By James Reeves
13th May 2015 11:44

PIM2080

"A landlord can’t deduct anything for the time they spend themselves working in their own rental business."

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