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Is window round rental income self-employment or other income

Is window round rental income self-employment or o

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Hi, a client receives income from renting out a window cleaning round that he used to work himself. These days his other income comes from his own ltd company (unrelated industry) being dirs salary + dividends.

Before coming to me the client prepared his own ITR's and declared the window-round rental income sometimes as self-employment and sometimes as other income.

He doesn't earn enough to pay class 2 or class 4 NI and I don't believe that there is a live self-employment registration for NI.

There are no expenses incurred. Just an income figure each year.

Should this be declared as self-employment or Other Income?

Thanks

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By brian.barrett
13th Jul 2016 18:02

What is the legal position? Does you client have the legal right to clean the windows on the particular round?? If so, then the 'rent' appears to be more of a licence type income.
If your client does not have the legal right, then what is stopping the other window cleaner from just cleaning the windows and not paying anything to your client?
Presumably if no legal right, which I suspect is the case, then the only reason your client is receiving money from the actual cleaner is because he/she has a business relationship with the clients and effectively is guaranteeing the work of the actual cleaner.
If the latter is the case, then it sounds more like a business partnership to me.

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Replying to brian.barrett:
By chewmac
13th Jul 2016 20:44

Hi bb, these are interesting questions and a point of view I'd not considered. My client has no legal right over the window round - he simply built up the work over many years and the new window cleaner pays a rent for now working this round with the understanding that my client could, if he wanted, take back the round at any time. The arrangement is very informal but has worked for several years.

Still I find it hard to believe that he is in a business partnership (although I understand the argument being that the new cleaner is effectively voluntarily sharing profits).

My client and the new cleaner have no other mutual business ties. Could it be deemed as more like a commission that my client receives?

Again, would it be Self-employment or Other Income?

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Replying to chewmac:
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By brian.barrett
13th Jul 2016 23:30

Other questions to consider is a) how is the payment calculated - percentage or fixed amount, b) what does the other cleaner think it is, and c) does the other cleaner treat the payment as a business expense or is it paid after tax?
The question remains as to what is actually being paid for? Your client never 'owned' the round and in effect can take it back when he wants?
This is above my pay grade but the payment does look like it is some ongoing payment for the goodwill, or use of the goodwill, of the business.

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Replying to brian.barrett:
By chewmac
14th Jul 2016 09:32

Again, I appreciate your replies. The payment is a % of earnings from the round and it seems that the other cleaner most likely treats this as a business expense - they both simply understand the arrangement as "rental of window round".

Thanks again, I'm not too sure that I'll get to the bottom of this one!

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Replying to brian.barrett:
By itp3asso
18th Jul 2016 13:24

Why doesn t the second party just pay the first party cash in a brown envelope down tbe pub every end quarter and be done.

In an " industry" renowned as cash turnover it would save these arguments as to how many angels can be placed on a pinhead ....and... would save the client unnecessary additional " professional fees" from his accountant . Job done.

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blue sheep
By NH
18th Jul 2016 12:24

what difference does it make? its below the NI threshold and however you declare it it will be taxed the same way

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By Portia Nina Levin
18th Jul 2016 13:39

[moderated comment - Ed]
Hopefully this will move you more towards the right general direction: https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim90000

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