I am sure that this was covered by comments in a recent post on property owned jointly by a married couple, but I cannot find it, so please excuse me bringing up the topic again.
My client are an unmarried couple who jointly own two houses. They now live in one house and have started to let the other. It is an ordinary furnished let, not a furnished holiday let. I know that married couples must split the income 50:50 unless there is a documented different split of beneficial interest and a Form 17 has been filed, but must an unmarried couple split the net letting income 50:50 in accordance with the beneficial interest or can they split it however they like - say 100:0 to avoid the other person having to file a tax return? (I know that Form 17 cannot be used by unmarried couples.)
Being clients, they are vague about whether the let property is held as joint tenants (50% of 100%) or as tenants in common (100% of 50%). Would this affect the issue?
Related resources
Replies (12)
Please login or register to join the discussion.
Revenue Manuals
They can do what they like. see Revenue Manual
http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm
PIM1030
I am slightly uncomfortable with the following section of PIM1030, hence my question:
"Jointly owned property - no partnership
Where there is no partnership, the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property."
"Normally" would mean 50:50. Can we rely on "joint owners can agree a different division of profits and losses" as the default for unmarried couples (or unconnected joint owners) despite most of PIM1030 being concerned with how married couples cannot generally agree a different division of profits?
PIM 1030
The important bit is
"The share for tax purposes must be the same as the share actually agreed."
So, if they want the income to be taxed as 100:0, then they must actually share it 100:0. This could be effected by paying the rent into a bank account of the 100% sharer, and also evidenced by a letter of agreement between them.
How's...
... THIS.
EDIT: Which incidentally agrees with the point stanbu made while I was typing my above wordy response.
OK
Thank you both.
Your advice confirms my initial belief. It was just that a colleague said that it was only on a FHL that you could split the profits other than 50:50 and so, I thought it prudent to check.
And the case of Kings v. King - which HMRC won by arguing it was the person who was entitled to the rents (and she actually received them).
Flagging
Please. What does flagging mean when used like that on this forum?
There is no longer the facility on AWeb to add a thread to a list of personal "favourites" for subsequent reference. People therefore post a comment so that it will be listed under their comments made and they can access the thread from that list.