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Buy to let - joint ownership with children

Buying my niece a house on a buy to let mortgage, funded by a deposit contributed to by all family

We are buying my niece a house as a buy to let property. The deposit is being funded mainly by my wife's and mine savings but we are also using our children's savings (which we can return in a few years when another investment matures). The children's savings are in their names. 

I am a higher rate tax payer. I note also that the rent can be at "non commercial rates" but there will still be an annual taxable profit.

Can we therefore share the profits between all of us and utilise the childrens personal allowances?

Thanks

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30th Sep 2017 17:17

You say the property is to be "joint ownership with children" but then say you are "buying my niece a house".
Which is it? Will your niece own it or will it be jointly owned?

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to runningmate
01st Oct 2017 12:35

Apologies my question is not clear- my wife and I will own the house and my niece will be a rent paying tenant.
I was hoping since we (my wife and I and our two children) all contributed to the deposit we could all share in the profits, thereby using our children's personal allowances.
Thanks.

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30th Sep 2017 17:53

Who owns the property is key here.

How the deposit is funded is irrelevant (well, largely).

So whose name will be on the deeds ?

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to lionofludesch
01st Oct 2017 12:43

Apologies my question is not clear- my wife and I will own the house and my niece will be a rent paying tenant.
I was hoping since we (my wife and I and our two children) all contributed to the deposit we could all share in the profits, thereby using our children's personal allowances.
Would the children have to be named on the title deeds of the property for it to be 'legit'?
Thanks.

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to lionofludesch
01st Oct 2017 15:31

lionofludesch wrote:

So whose name will be on the deeds ?

That is an irrelevance. It is perfectly possible for beneficial ownership to differ from legal ownership, and it is beneficial ownership that matters.

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By kaff
30th Sep 2017 18:15

You've suggested that you and your wife will be borrowing your children's money temporarily so that you and your wife can purchase the house. That in turn suggests that the intention is for you and your wife to own the house, which makes it difficult to see how the children could be entitled to any rental income from it.

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30th Sep 2017 18:29

Do you mean that yourself & your wife are buying the house and your niece will be the tenant on a non-commercial rent?
Also that you are 'borrowing' from your children to fund the deposit.
If so the profit will be taxable on yourself & your wife (as you will be the owners of the property).
If yourself & your wife own unequal shares in the property then the profit could (not necessarily would) be taxable on yourself & your wife in proportion to your ownership.
Don't forget Stamp Duty Land Tax on the purchase (except in Scotland).
RM

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to runningmate
01st Oct 2017 12:50

Yes, you are correct, my wife and I are buying a house and my niece will be paying rent.
By putting our children on the title deeds as part owners would appear to be the correct way of proceeding - would we be allowed to?
Thanks

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to SJIreland
01st Oct 2017 14:37

How old are these children?

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to lionofludesch
01st Oct 2017 14:53

11 and 13

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By jcace
to SJIreland
01st Oct 2017 22:41

A minor under the age of 18 cannot own land or property in the UK

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to jcace
02nd Oct 2017 07:22

I think you mean a minor cannot take legal title to property (which is not quite the same thing).
RM

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01st Oct 2017 15:32

OP go and take paid for professional advice. You're not going to get the enlightenment you seek here, and nor should you.

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01st Oct 2017 15:53

I agree with PNL.
The issue is who are the beneficial owners of the property. Discuss it with your solicitor.
Bear in mind that there is a difference between (1) you borrowing money from your children & using it to buy the property yourself, and (2) the children providing some of their money to purchase an interest in the property themselves & you purchasing the rest.
If you go for (2) then the children don't get their money back until either (a) the property is sold, or (b) you or somebody else buys their share of it.
If you are borrowing money from a commercial lender on a mortgage they may have something to say about your proposals too.
RM

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to runningmate
01st Oct 2017 20:36

"The" issue? An issue, yes. There are others, legal and tax. Whence the children obtained their money is just one of them.

The old adage about a stitch in time saving nine has (its seems) been so long forgotten that I am sure I can misapply it slightly: a small upfront professional fee can save nine times the cost sorting the mess out later.

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to Tax Dragon
02nd Oct 2017 07:25

Yes, exactly, yes.
RM

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02nd Oct 2017 10:17

The planning (using children's PAs) is sound in principle, but you need to consider, inter alia, the guidance in the link below, settlements legislation, 3% SDLT surcharge and tax relief restrictions for non-commercial rent.

https://www.gov.uk/government/publications/private-trusts-of-land/practi...

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