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Buy to Let and Tax Credits

Buy to Let and Tax Credits

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My client has several BTL properties, which is her only income.

Rather than paying letting agents to do rental collection/maintenance, she opts to do it all herself.

However, she feels that she is working and should be able to claim WTC.  Property income is obviously investment income, and not 'work' for WTC.

The only scenario I think which fits this would be for her to create a property management company.  She retains the properties personally, the company does all the work and bills her accordingly (in the same way that a letting agent would do).  She works for the company and can claim WTC.

There is obviously the issue of sufficient working hours to qualify for WTC.  Aside from that, would this work?

My own feeing is that it is contrived, not sure whether it's fraud!

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By Portia Nina Levin
13th Nov 2014 15:02

Contrived?

Richardrussell wrote:

My client has several BTL properties, which is her only income.

Oh the poor love. How does she manage?

So your idea is to create a company to employ her to do something that she already does for herself for nothing and then the company charges her for this service, which she pays out of her hard-earned earnings from the company.

Hmmm. Tricky. Is it contrived? Oh, yes! Now you mention it, it is a complete sham!

Hmmm. Even more tricky. Is it fraud? I like the way you have led me through this. The only reason she has entered into this sham is so that she can ponce extra dosh of the state!

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By nogammonsinanundoubledgame
13th Nov 2014 17:25

I don't think that it is for us to make moral judgements of the taxpayer/claimant, but it is for the government to put in place a welfare system the correct statutory operation of which fairly reflects their needs and means.  It is no secret that the tax credit system falls woefully short of that objective, which may be part of the reason for its imminent demise (the complexity of its administration being the other main reason).

In the meantime I see nothing wrong with a taxpayer asking a question of whether she is lawfully entitled to benefit from a highly complex legislative environment which is being manipulated by all her peers, without being scoffed out of court.

And it is not just in the field of tax credits.  You can easily get into a long and drawn out argument with the Class 2 NIC office over whether contributions are due by property business owners, Rashid v Garcia notwithstanding.  Maybe if she registered for 2NIC she would stand a chance for tax credits, although the legislation is different.

I suggest that the agent or client familiarise themselves with

http://www.hmrc.gov.uk/manuals/tctmanual/TCTM02400.htm

You should also, I think, expect to have to defend an audit enquiry if WTC is claimed where there are neither self-employment (sole or partnership) nor employment pages included.  When completing an annual declaration of income, would she be declaring the IFP as "self-employment" earnings for TC purposes?

With kind regards

Clint Westwood

 

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