short term lets of jointly owned principle dwellings....and pensions!

short term lets of jointly owned principle...

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I hope this is a question that someone can help me with. A husband and wife own a house jointly (the family home), but are thinking of renting this home out while they are away for a few weeks a year (this is a growing trend, and the question will no doubt come up with increasing frequency). The wife is taxed at the lower rate, and they would like to have the rental income in her tax return. They don't want to affect their CGT exemption on the house, and they want to be able to put the rental income into her SIPP, and get have this income effectively tax free (it will be less than £50k).  The issues are whether they can transfer the beneficial interest (or at least 99% of it) in the house to her, without upsetting the legal ownership (and do so simply and cheaply), and whether the income can be then fully invested in a SIPP.  This question seems to be gathering attention as more 'short term' letting agencies set up alternatives to hotels, and the current HMG guidance only really deals with rentals of BTL houses, letting single rooms to tenants, or holiday lets. This is a rather new, but growing area, and whether or not to undertake this type of activity depends on whether the tax and pension arrangements can be simple and make sense.

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By rajindersingh
16th Feb 2011 10:38

Transfer

Need to be carefull as the undelying ownership of the property needs to match the beneficial interest for income purposes so you can't have a property owned 50:50 but the rental assessed on say 90:10 basis.  Therefore, a transfer to the wife needs to take place and inevitably this will cost a bit in solicitors fees etc.

Any rental income received can be be contributed into the SIPP but only serves to increase the basic rate band by the gross contribution.  I can't see how the income can be cosidered to be tax free as you put it!!!

Feel free to email if you want to discuss further.

[email protected]

Raj Singh

Chartered Tax Adviser

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