Mother and son sharing rental property

Mother and son sharing rental property

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Dear All,

Thank you for your help in advance. My mother and I share a rental property since '14. This is owned 66:33 in my mother's favour.
We know that through PIM1030 we can share the rental profit as we choose and so since '14 its been 60:40 in my favour as this proves to be tax-efficient.
However we are now at a stage where actually it makes sense to share the rental profit 60:40 in my mother's favour.
Are we able to change the % profit share year-on-year as long as we have a prior agreement at the start of the term.

Thank you

PIM1030:
'Where there is no partnership, the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.'

Replies (12)

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By Paul Crowley
19th Dec 2020 16:09

You were warned that posting Anon gets less response

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Replying to Paul Crowley:
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By Wanderer
21st Dec 2020 12:12

OP is used to ignoring the warning though. This is, at least, the 7th question they have posted as Anonymous.

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Replying to Wanderer:
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By Paul Crowley
21st Dec 2020 19:20

Well spotted

@OP
If we see your prior questions we are better able to give an appropriate reply

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By Matrix
19th Dec 2020 16:36

Why should anyone on here help you since you have been a member for over 5 years and have just taken and not given anything back?

And yes I am Scrooge as Boris has just cancelled my Christmas.

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By Tax Dragon
20th Dec 2020 09:28

I agree with Paul and Matrix.

But your question provides an opportunity to make, yet again (with due apologies to those that are bored of this), a general observation. It does so because it illustrates the issues that can arise when you take one sentence of general guidance as gospel and [have a mindset to] ignore (or, in your case, maybe are unaware of) other more detailed guidance and/or specific legislation. This mindset puts you at risk (I would say at high risk) of taking one sentence from one reply you like as being enough to conclude your tax (and here too the tax of your mother, potentially putting her at risk of penalties etc). The fact that you have asked it is itself further evidence of such a mindset. The chances of you taking any suitable advice you are given here seem to me to be slim.

However, you are wrong to rely on any answers you receive, or have seen, in here (or for that matter any other free-for-all forum). It's not just me saying that - read the guidance on use of the forum.

But since I'm here now, I'll give you a steer. Forget PIM1030 until you have considered both settlements legislation* and Ch5A of Pt13 of ITA2007. Here's a link to the start of the second: https://www.legislation.gov.uk/ukpga/2007/3/section/809AZA

You might want to hire an accountant at this stage. You know, just to make sure you don't pick and choose the wrong bits to read and run yourself and your mum into a situation which will then cost you more to put right. Take that as a suggestion, not advice. I know you wouldn't take any advice I gave.

*Read this first. Start at s624 ITTOIA.

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Replying to Tax Dragon:
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By unearned luck
22nd Dec 2020 00:56

The implied tax question is quite interesting.

Section 271 ITTIOA 2005 says that the charge to tax arises on the 'persons receiving or entitled to the income'.

There appears to be a choice as to who is taxed. The receiver or the person entitled. Whose choice is it? Since it is the taxpayers who must do the assessing, it seems reasonable to say the choice lies with the taxpayers.

On this analysis the OP should have ensured that the rents were received in the agreed ratio and on any change in the agreement the tenant or letting agent must be instructed to pay the rent in accordance with the new agreement.

But is there really a choice?

The Special Commissioner seemed to think so in the three kings* case (Kings & Kings v King) but more recently Richard (and John Wilson) in Bobat followed Lord Cave in Williams v Singer** and decided that Mr Bobat, on the facts, was both the recipient and the person entitled because the legal owners were trustees for the beneficial owner.

The OP might also wish to bear in mind the word "occasionally" in PIM1030 and since he admits that his object is "tax efficiency" the warning in the preface to the manuals that HMRC will not consider themselves bound by them in a case of tax avoidance.

Of course, none of this is relevant in H&W/CP cases.

*You try to be seasonal and end up with an earworm of three kings travelling afar.
**Sewing machine heiress and Princesse de Polignac. Well worth looking up on Wikipedia.

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Replying to unearned luck:
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By Tax Dragon
22nd Dec 2020 08:58

You have omitted "under this Chapter". The legislation I pointed to is not "under this chapter" and would, it seems to me, operate without deference (or even reference) to s271. Before he gets as far as navigating your quite interesting observations, I think the OP has to work through the legislation referred to previously.

(In short, our answers work together, in the order they were given.)

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By carnmores
21st Dec 2020 11:48

well i do not agree with them

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Replying to carnmores:
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By Tax Dragon
21st Dec 2020 12:28

Paul is undeniably correct - there are people that respond less often, less willingly and/or less helpfully, to Anonymous. That's just a statement of fact.

Matrix asked a reasonable question. But if you disagree with Matrix do feel free to walk the OP through the legislation I have helpfully steered him towards as well as raising any other points you think are relevant.

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By carnmores
21st Dec 2020 12:22

as long as that choice is available they are entirely within their right so to do

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Replying to carnmores:
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By Tax Dragon
21st Dec 2020 12:29

Helpful, answering a different question to the one asked.

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Replying to Tax Dragon:
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By Tax Dragon
21st Dec 2020 15:27

I take that back. Nick, you have indeed answered the question written (and, though it's a legal question and IANAL, I would be amazed if you were wrong).

It was me that assumed that the OP wanted to know about the tax. The error is mine. Apologies. (You get a gold star; I get detention.)

(Kind of demonstrates my oft-repeated point though about personal questions in forums frequently being the "wrong ones".)

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