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How can Airbnb income be split?

If one of the co-owners manages the property on Airbnb, can he receive more of the profit?

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We are considering acquiring a buy-to-let property 50/50 with our son who would then run it on Airbnb.  As he would be doing the work, could he receive a greater share of the profit than 50%?

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18th Jun 2019 14:51

Yes, he certainly can receive whatever % of the profit you care to agree.

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to Accountant A
18th Jun 2019 14:59

I think you mean, "why don't you ask your accountant?"

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to Vile Nortin Naipaan
18th Jun 2019 15:23

Vile Nortin Naipaan wrote:

I think you mean, "why don't you ask your accountant?"

Yes, that as well but I like to have a bit of a laugh with posters sometimes too.

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18th Jun 2019 14:57

You can agree whatever income split you like.

I would always advise that the parties agree exactly who does what and who gets what - and put it in writing. If you've thought about this in advance, it reduces the likelihood of dispute later on.

I'd also advise getting an accountant. S/he can help you to set up the venture in a tax-efficient way from the start rather than having to fix it afterwards. S/he can also help you to make sure that you comply with all of your tax obligations.

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By Martc
18th Jun 2019 15:06

Thanks for the replies. If we decided to assign 90% of the annual profit to our son, would we have to provide any justification to HMRC?

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to Martc
18th Jun 2019 15:24

Martc wrote:

Thanks for the replies. If we decided to assign 90% of the annual profit to our son, would we have to provide any justification to HMRC?

Nope, it's "self assessment" so you just do whatever.

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to Martc
18th Jun 2019 15:32

Do you mean income (ie the gross amount from lettings) or profit (the amount left over from income after paying the expenses)?

There are a whole lot of things to consider - who is putting in money to buy the property? Who is doing what work? Do any of the parties have other income - whether from employment or investments? Should you be thinking about estate planning?

You really need an accountant to help you set this up. It will help you to avoid unwelcome surprises later and may well save you far more in tax than you will pay in fees.

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18th Jun 2019 15:39

Shhs now,

@ The OP just make up whatever you think it best. Just do it, its really easy, and HMRC are a push over.

@our lot, FFS, virtually no fee in advising on this set up, but be a big fat juicy one to sort it all out in a couple of years. Stop peeing on the pitch people!

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By kealy
18th Jun 2019 15:44

Unless you are going to buy outright you will really struggle to get a mortgage and it definitely won't be a BTL mortgage.

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By Martc
18th Jun 2019 17:49

Would it be acceptable to HMRC if our son paid us a market rent for our half and then then ran his Airbnb enterprise on his own behalf? That way we wouldn’t have to get involved in the Airbnb revenue, costs and profit at all.

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to Martc
18th Jun 2019 17:57

Would it be acceptable if we all came to stay in the property for free? That way we wouldn't have to get involved in earning any money to pay for our stays.

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By Martc
18th Jun 2019 18:09

Unfortunately no, but thanks for your interest!

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to Martc
18th Jun 2019 20:04

Martc wrote:

Unfortunately no, but thanks for your interest!

So why do you think we'll give you free tax advice? That's how most contributors here make their living.

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By Martc
18th Jun 2019 22:12

I must have misunderstood. Isn’t this somewhere where questions can be asked and experts, if they wish to, can give answers and advice?

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to Martc
19th Jun 2019 08:52

And that's exactly what has happened. You've asked questions and experts have given advice.

You yourself have identified that the arrangement could be structured in various different ways. All are possible but whether they are wise or tax-efficient is another matter which I couldn't begin to answer properly without knowing much more about the financial (and other) circumstances of the parties involved. All of that takes time and expertise. Just as you won't be giving free lets of your Airbnb, you won't get that time and expertise for free.

Which is why the advice given can be summarised as "you need an accountant".

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to Martc
19th Jun 2019 09:14

@Martc, this is a site for accountants to talk to other accountants.

The owners, SIFT dont seem to care if the public ask questions, but you will see from the answers above many of the users will take the urine if you do.

Fundamentally. you have a tax problem, for goodness sake get some proper advice. If you rang me (a Chartered Accountant in practice, specialising in property tax, but not taking on new clients right now, so don't bother messaging me) I could answer your question in about 15-20 minutes, probably for free in the hope I picked up the ongoing compliance work. There are a couple of ways of doing it, all of which are an "it depends on your circumstances, and what your aims are"

You are about to spend presumably the thick end of £200-400k on this, even if you get charged £200 for the advice; so what?

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By Martc
19th Jun 2019 09:46

Thank you for your clear response. I apologise for not realising that this is an “accountants only” site and will exit forthwith!

Just to add, I don’t mind paying for expert advice but the advice already received from an accountant is that all forms of income must be shared by the owners in the ratio of their ownership shares. This is not supported by the Gov.uk website although it’s not absolutely clear. I posted here because it would have been nice to have a second opinion, and also because this may be a question that accountants are asked more in the future.

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to Martc
19th Jun 2019 11:30

I do respect you for at least engaging with the discussion rather than asking a question and never showing your face again.

I can't comment specifically on the advice you already received but it sounds like it's a narrow answer to a narrowly asked question - which is why you've found apparently contradictory information on gov.uk.

May I suggest that when you do go to an accountant (or back to your first one), you start by describing the scenario and asking how it might be most efficiently structured.

You've clearly got enough imagination to suggest alternative arrangements (such as you owning the property and your son as operator) and enough sense to ask before doing. (You'd be surprised how many don't and ask for help clearing up an avoidable mess)

As ishouldreaallyknowthat says, it's not necessarily a costly discussion.

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to Martc
19th Jun 2019 12:05

Free advice, if Marty, Dory and Roger (Marty and Dora's son own a property 35%:40%:25%. They can choose to allocate that profits 10%:20%:70% and nobody can do anything about it.

If the profit sharing ration can be justified by reference to both their share of the underlying capital and their effort contribution that is how they will be taxed too. There is anti-avoidance legislation that can apply if the allocation can't be justified, but it's unlikely to be applied unless there are big bucks at stake if the profits have genuinely been split in that ratio.

What definitely can't be done is to share the profits 33%:33%:33% as a matter of fact, and then be taxed on it 10%:20%:70% because it results in lower overall tax.

It's complicated.

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