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Colombian property

Client owns the property but doesn't receive the income

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I have a Colombian client that owns an apartment in Colombia but who has never recieved the income from this.  For family reasons her sister has always received the rent.  The client confirms it is shown on the sister's Colombian tax return.  I am minded to at least put a note in the white space of the UK tax return to show this but I realise that may be tantamount to inviting an enquiry.  I am also concerned with the current HMRC requirement to correct deadline of 30 September and whether this should be mentioned.    If the sister at least owned part of the property it would be less of a problem  but as my client owns it by herself does anyone see this as being a problem?  Anyone with similar experience I'd be very grateful for your input.

Replies (19)

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By Tim Vane
18th Sep 2018 13:24

No income no white space note required. Nobody would ever read it so no issue including it, but why bother. Just make a file note of the clients answers and move on.

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By Ruddles
18th Sep 2018 13:39

A Colombian's tax return with a "white" space. Hmmm ...

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By WillowTree
18th Sep 2018 13:56

My worries started on this when I thought of the Requirement to Correct legislation. Its fair enough to make a note and make no mention of it on the tax return but I'm over thinking it aren't I?

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By Accountant A
18th Sep 2018 14:07

Lucky the property wasn't in Australia or it would have been taxable:

https://www.accountingweb.co.uk/any-answers/requirement-to-correct-how-f...

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By Accountant A
18th Sep 2018 14:39

WillowTree wrote:

For family reasons her sister has always received the rent. 

This has been discussed multiple times in relation to UK property. Someone says " ... but it gets paid to XYZ, not to me". Who receives the rent isn't (other things being equal) relevant. If you own the property then, 99 times out of 100, you own any income arising.

WillowTree wrote:

The client confirms it is shown on the sister's Colombian tax return. 

I don't know what the rules are in Colombia but I can't see it having any bearing on the UK tax treatment.

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Replying to Accountant A:
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By WillowTree
18th Sep 2018 14:42

That was my thought when discussing it with the client. If she could at least gift a small part of the property to her sister then it would be possible to treat it in the same way as a partnership and divide it as they pleased.

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Replying to WillowTree:
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By Accountant A
18th Sep 2018 15:04

WillowTree wrote:

... it would be possible to treat it in the same way as a partnership and divide it as they pleased.

Or not, as the case may be. Owning a property with someone ain't a partnership, as far as I am aware.

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Replying to Accountant A:
By Ruddles
18th Sep 2018 14:50

Cue Justin and discussion about declared and constructive trusts.

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Replying to Accountant A:
By Ruddles
18th Sep 2018 14:50

Duplicate

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Replying to Ruddles:
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By Tax Dragon
19th Sep 2018 06:58

In Colombia, possession is 10 tenths of the law.

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By Matrix
19th Sep 2018 07:15

Columbia has first taxing rights so there may not be any UK tax although it would still have to go on the return if the income is remitted to the UK, if he is taxed under the remittance basis, you do not say.

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Replying to Matrix:
By Ruddles
19th Sep 2018 08:08

Matrix wrote:
Columbia has first taxing rights

Says who?

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Replying to Matrix:
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By WillowTree
19th Sep 2018 11:18

Not remitted, the sister that receives the income lives in Colombia. My client is the one in the UK that has no income from the property and is causing me the headache.

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By Montrose
20th Sep 2018 10:22

Possible alternative analysis.
If sister receives the rent, who does the tenant think is the landlord?
Suppose UK sister gives her Colombian sister a licence to occupy the property, and it is the Colombian sister who lets out the property and receives the rent.

Would the UK tax result be the same?

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Replying to Montrose:
By Ruddles
20th Sep 2018 10:47

It's time to stop the guesswork. The profits are taxed on the person that receives, or who is entitled to, them. The OP needs to establish who is entitled to the profits, and that will lead them to the answer.

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Replying to Ruddles:
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By Tax Dragon
20th Sep 2018 11:50

I sense the steel of law in your words.

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Replying to Tax Dragon:
By Ruddles
20th Sep 2018 11:53

But is it not tax law that ultimately dictates who pays tax and how much?

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Replying to Ruddles:
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By Tax Dragon
20th Sep 2018 12:45

You and I might think that, but there seems to be no appetite for seeing legislation cited in this forum. (You did it subtly and I don't think anyone has noticed, but be careful, it's a slippery slope you're on!)

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Replying to Tax Dragon:
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By Portia Nina Levin
20th Sep 2018 13:30

They German. Don't mention the war. I did it once, but I think I got away with it.

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