Share this content
0
542

Can a non-owner declare rent on a flat?

Rent declared by a non-owner

I own a flat which is rented out and managed by my mother. She gets the rent and pays for all the maintenance fees-grount rent, insurance, etc..the rest of the rent income she uses for her living expences. So she is actually declaring the rent on her SA. Are we doing the right thing here?Can someone please advise? Just to clarify, neither me or any one else receives any of the rent income rather than my mother.

Thank you

Replies

Please login or register to join the discussion.

avatar
12th Feb 2019 17:40

Stan Stefanov wrote:

Are we doing the right thing here?

No.
Thanks (0)
avatar
12th Feb 2019 17:44

It sounds like your mother has a nil rent, nil premium periodic tenancy with you as landlord and she sublets to the occupational tenants, which all sounds fine assuming they are happy with that (most occupational tenants would want to deal with the legal owner).

Thanks (0)
avatar
to Justin Bryant
12th Feb 2019 17:51

I do not have any sort of agreement with her apart from a verbal one but I can surely sign off a nil rent one. I have never dealt with the tenants anyway, she is the only one involved in that. I just wasn't sure if me signing nil tenancy with my mother with the option for subletting is the right way to go for.thanks

Thanks (0)
12th Feb 2019 18:18

Id get an accountant if I was you who advises in this area. I am somewhat biased on that front.

But in principle if there is a bare trust and your mother is the beneficiary, it might be OK. I am not sure I agree with Jason about making up transactions that don't exist, then I rarely agree with Jason, albeit we did agree earlier this week, so it does happen.

I would make sure you have it all signed up properly however, HMRC might assume it was some sort of tax dodge and are not known for understanding how trusts etc work. Having a decent paper trail is key to an easy life if you have a tax investigation. The tenancy agreement is key to get right.

It will also be critical when it comes to CGT on sale.

Thanks (2)
avatar
By Rweaver
12th Feb 2019 18:41

Hypothetically; if the flat were sold - who would keep the sale proceeds? You, or your mother?

Thanks (0)
avatar
to Rweaver
12th Feb 2019 20:14

Should be me, not any tenant

Thanks (0)
avatar
By Rweaver
to Stan Stefanov
12th Feb 2019 20:23

Tenant?

Regardless, your answer indicates the reply by ‘ireallyshouldknowthisbut’ is more or less b0110cks.

Thanks (0)
avatar
to Rweaver
12th Feb 2019 22:27

Which is it? More, or less? And compared with what? Justin's answer? And shouldn't it be "fewer"?

Thanks (0)
avatar
By Rweaver
to Tax Dragon
12th Feb 2019 22:54

I think you mean Jason... ;-)

Thanks (1)
to Rweaver
13th Feb 2019 12:15

Rweaver wrote:

Tenant?

Regardless, your answer indicates the reply by ‘ireallyshouldknowthisbut’ is more or less b0110cks.

Very professional...

Thanks (0)
12th Feb 2019 18:51

Sounds like evasion rather than avoidance to me.

You'd have a lot of trouble getting HMRC to believe your informal, oral agreement.

At least get it in writing. Make some sort of effort.

Thanks (0)
avatar
to lionofludesch
12th Feb 2019 20:12

Yes, that is my next step , I am actually waiting for that to be ready really soon and it's not about the effort its about the diversity in advise I keep getting. Thank you

Thanks (0)
avatar
to Stan Stefanov
12th Feb 2019 22:59

Free advice will always be diverse. Especially since you have been fairly frugal with the facts.

Thanks (1)
avatar
to Stan Stefanov
13th Feb 2019 09:24

The advice you have received has been based on the info you have provided.

When you speak to your accountant, you do need to consider whether your mother is indeed the beneficial owner of the property - in which case she would be entitled to the full rents and the full proceeds if the property was sold. This should be properly documented as stated in the responses above.

Your responses suggest that your mother keeps the rents and you would keep the sale proceeds, which doesn't work.

Thanks (0)
avatar
to gainsborough
13th Feb 2019 12:11

I have spoken to 2 different chartered accountants specializing in property taxation and one said she has to be treated as a beneficial owner, the other one says that signing a tenancy agreement with her with a few specific points is enough. Both agree that in either case she can definetely declare the rent on her SA.
I have only asked here as I believe there are quite a few accountants here who can help me find the right way by sharing there professional expertise
She gets and keeps the rent income, and I strongly believe she should be paying the tax on that, as to the beneficial owner I don't see why she has to be treated as such, rather than just a tenant who is subletting the property.
This is exactly what I am trying to do, to actually sign off the proper agreement.
Anyway I have another meeting with a property tax advisor on friday and see if we can get somewhre. If anyone knows someone who is an expert into that field of taxation please share ?

Thanks (0)
avatar
to Stan Stefanov
13th Feb 2019 12:47

The other respondents above don't know what they are talking about and it seems your accountant agrees with me. She doesn't need to be the beneficial owner of the freehold (or superior interest) (gifting that to her would cause CGT issues for you) and she can be the beneficial owner of her "free" (or say £1) lease from you can't she?

Thanks (0)
Share this content