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Property income and expenses

Property jointly owned with children

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A client owns a property with his two children (Both over 18). Parent owns 80%, chiildren 10% each.  Joint tenants.  Does the income have to be split 80:10:10 or as its not married couple, can the income be allocated for tax purposes in any proportion they choose?

Secondly, parent meets all the expenses, do the expenses have to follow the income split or can 100% of expenses be allocated to parent as they have paid them all? or can they choose to allocate expenses in any proportions they choose? 

 

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By Hugo Fair
18th Oct 2021 11:15

Waiting for the property experts to come along, but in the meantime ...

* "can the income be allocated for tax purposes in any proportion they choose?"
Can = yes; but HMRC may query the basis of any decision for it not reflecting the 80:10:10 split of ownership (especially if the 'other' split keeps changing).

* "can they choose to allocate expenses in any proportions they choose?"
I wouldn't have thought so, if you mean that one or other 'child' ends up claiming for expenses that he/she didn't personally pay.

BTW I'm assuming that property is indeed owned by the individuals (not via a company or partnership).

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Replying to Hugo Fair:
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By pauld
18th Oct 2021 11:28

Thanks Hugo - property owned by individuals. Although I agree that split of income can be different, I don't feel comfortable with that but couldn't find anything that says you can't do it.

Irrespective of income split, do you think 100% of expenses can be allocated to parent as they have pay all running costs.

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Replying to pauld:
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By Hugo Fair
18th Oct 2021 11:59

I honestly don't know - which is why I was waiting for a property expert responder!
Logically, I'd say "No" - as parent could otherwise just as easily claim for other costs that are not her/his liability. But a split-owned property may be different?

BTW when you say "as they have pay all running costs" ... did you mean 'have paid' or 'have to pay'? i.e. is there any reason why children can't pay 'their' share?

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Replying to Hugo Fair:
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By pauld
18th Oct 2021 12:08

Parent voluntarily pays all running costs, which are quite high due to service charges etc. Basically doesn't want to burden the kids with any costs.

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By Bobbo
18th Oct 2021 15:42

Not a property tax expert so happy to be corrected on this, but does allocation of income not mean (/also cover) the income after expenses?

I.e. if the parent is paying all the rental expenses then you've already diverged from the 80:10:10 split as the adult kids are ending up with more than 10% of net profits.

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By David Ex
18th Oct 2021 17:02

HMRC’s PIM gives their view on “jointly owned property” generally.

As others have said, I don’t see how you can say you have an 80% interest but then claim 100% of the expenses. That’s just an initial reaction and it may be doable.

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