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Do they need to register for income from property

They have no other taxable income, so why complete a SA return

Basic details: parent owns own home (own name not joint) and is now sectioned under the MHA since 2014, No mortgage left on the property.

Daughter has LPA in place.

Property, although un-occupied to date, council tax bills etc have been paid by the mum. Possible intention that the mother may return to the property at some point. Bills paid from money saved in the bank account,(by the way in case you wished to ask).

As the mum has now been sectioned, she receives no state pension (stopped being payable once she was sectioned), or any other personnel pension or taxable income.

Now the property is due to be rented out from say Jan 18. The rental income being circa £650 PCM. This naturally gives an annual gross rental income of £7,800, being less than the personal allowance.

I am aware that if net rental income is more than £2,500, then you have to register with HMRC for income from property, under SA.

Yes, I understand that this is the rule, but it is a bit daft (you could say many things are daft where HMRC are concerned) as the overall outcome is no taxable liability. More work for nothing and an additional cost to the potential client.

Having thought about it, I would get the daughter to write to HMRC with a copy of the LPA and ask for exception to filing a SA under this situation. Cannot see a reason for her to file a 64-8 (agent)? More so as the mother cannot really complete a CWF1 either, (as in a signature).

Last time I looked at something along this line. You were allowed 3 years renting of the property before it became not your main residence and then was not allowed the PPR.

Plenty of time before the rental income has to be declared, just wanting to get things in place I suppose.

Any guidelines would be helpful.

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By kaff
06th Dec 2017 21:43

I suggest you start off by reading section 7 TMA, which sets out the statutory obligation to notify chargeability to tax. There is nothing in there about "registering for SA", whether for rental income or for anything else, where there's no liability. If HMRC issue your client with a notice to file a return, then under section 8 TMA she is obliged to make a return irrespective of whether there's tax liability (although you can ask them to reconsider the need for a return if you don't think there is a need). But if there's no liability to tax and HMRC haven't issued a notice to file, then you're not under any obligation to tell them anything.

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07th Dec 2017 09:14

Concur with the previous poster, I know exactly where you got the £2,500 from and the .gov.uk site is riddled with misinformation that is not backed up by statute.

I have no doubt if you phoned HMRC they would tell you the same thing but that is more likely down to the person on the phone googling the same site than out of any sinister motive on their part.

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By MJShone
07th Dec 2017 09:55

You refer to 3 years re PPR. It's 18 months now.

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07th Dec 2017 10:21

Are they a company director?

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By puzzel
to Portia Nina Levin
07th Dec 2017 23:11

No not a company director, strange why you ask when I am sure I mentioned individuals home & ppr.

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to puzzel
08th Dec 2017 00:11

Well, it's just that company directors have to file tax returns irrespective of circumstances. HMRC say so.

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to Portia Nina Levin
08th Dec 2017 12:45

Portia Nina Levin wrote:

Well, it's just that company directors have to file tax returns irrespective of circumstances. HMRC say so.

Naughty :D
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07th Dec 2017 10:28

In such tragic cases as this, I think one has to be realistic and pragmatic in the attempt to resolve the situation, as efficiently as possible.
You say that the daughter has the LPA in place and, presumably, due to the ongoing events, the LPA has been active since the event?
I'd therefore suggest that the daughter contacts (in writing) HMRC setting out, in as much detail as possible, the present predicament and, a suggestion to "remedy" the situation, with as little additional costs as possible.
It may also be useful to seek support/information, from MIND, at https://www.mind.org.uk/information-support/
I've attempted to find an HMRC "special situations" area on the website, regretfully, without success.
Once again, this situation highlights the lack of understanding of mental health conditions and, the knock on effect, to those left to support these individuals.

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By K81
07th Dec 2017 11:02

are you certain state pension has stopped or is this being paid direct to hospital/care home ?

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By puzzel
to K81
07th Dec 2017 23:15

Once a "client or customer" is taken into care, and is fully funded, they do not receive their pension direct. So a question beyond my current knowledge, is it taxable income or not.

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07th Dec 2017 10:33

I'd do nothing. There is no legislative requirement to register, and if HMRC say differently in the future I would challenge them on it.

If HMRC create a requirement to file by issuing a notice, I'd do my level best to have it withdrawn.

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to SteLacca
07th Dec 2017 11:14

I agree.
Subject to the state pension point raised by K81, her total income (let alone her net property income after deducting expenses) is less than her personal allowance, so there is no tax to pay and no legal requirement to notify chargeability under s.7 TMA 1970.

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07th Dec 2017 12:06

I would agree with the "do nothing"

Should HMRC go after it down the line, there cant be any penalties if there is no tax so LONG as no return has been issued.

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By Matrix
07th Dec 2017 19:20

If this is a prospect that has asked for your help and you advise her to do nothing then this could come back to you. I would only give such advice to an engaged client having established all the facts.

So I would engage the client (the daughter if necessary)and charge a fee for writing to HMRC with the full details either from you as tax agent or if not possible to set up then just draft the letter for the LPA to send.

Alternatively, if the LPA does not have the money to pay you (but I assume contacted you in the first place and you sat down for a meeting to get all these details so was prepared to pay a fee) then refer her to Tax Aid.

Others may disagree but I am not running Tax Aid, I am running a business and there could be facts that are missing such as the pension per above. I don't know much about state pensions but it does sound odd that it was cancelled so the total income could be above the personal allowance.

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By puzzel
07th Dec 2017 23:37

Many thanks to all,
The reason I suggested writing to HMRC was more in line with the HMRC "letting property campaign". Some of you may not be aware, but since around Apr 14. Letting agents have had an obligation to provide full details of properties that they manage on behalf of individuals, partnerships etc. Giving details of landlord, property address and gross annual income. Why else did they come up with the scheme.
So if you don't declare the rental income you could be caught under the letting property campaign. Which could cause more work than required.
I do see the point that due to the individual circumstances, the income is less than the annual allowance, and no tax would be due.
But then being pro-active, is it not better to get the issue resolved before HMRC start dropping brown envelopes through the door (the other colours are usually tax rebates).
Damned if you do and damned if you don't.

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to puzzel
08th Dec 2017 02:40

puzzel wrote:

Many thanks to all,
The reason I suggested writing to HMRC was more in line with the HMRC "letting property campaign".

Oh dear. Let's try that from the top.

First of all it's the Let Property Campaign.

Secondly, it's not what you think it is. It is a way for landlords to 'fess up and pay tax they already owe.

Thirdly, it is completely irrelevant in the situation you describe. Your client can't be "caught" because they don't have any tax to declare, so the LPC is not in point.

Fourthly, if HMRC do drop a brown envelope through the door then that would be the time to provide the details. If you send a pre-emptive letter then that is very likely going to trigger a demand for a tax return.

So write or don't write, but it almost sounds as though your intention is to get your client sucked into SA, where you should really be trying to ensure she stays out of SA.

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to puzzel
08th Dec 2017 10:20

puzzel wrote:

Some of you may not be aware, but since around Apr 14. Letting agents have had an obligation to provide full details of properties that they manage on behalf of individuals, partnerships etc. Giving details of landlord, property address and gross annual income. Why else did they come up with the scheme.

Love the condescending tone of this only to be told you are the one who 'may not be aware' what you are talking about! :)

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08th Dec 2017 17:17

TMA s8(7) requires the holder of the LPA to complete a return if one is issued.

TMA s13, requires anyone who receives income in whatever capacity on behalf of someone else..." shall, whenever required to do so by a notice given to him by an inspector, prepare and deliver, within the time mentioned in the notice, a return in the prescribed form, signed by him, containing—...".
But this does not apparently extend to requiring a return where no form has been issued to the recipient.

In a parallel case , where a severely learning disabled individual-not sectioned- received support from an overseas trust HMRC conceded there was no way HMRC could seek to collect any tax due.

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