Member Since: 18th Feb 2013
2nd Aug 2020
I agree we can read it as if the exception only applies if the payment from the partnership is a payment in respect of rent payable by the partnership to the partner. That fits if we assume the only purpose of / reason for the exclusion, is to to prevent avoidance in a control situation. But, look at bullet 5 referring to rent a room. Why is that exception included? It appears to be due to the claim for expenses. If you consider how the relief works, it applies (for property) if you choose not to claim actual expenses and that must apply to all your rental income. As I said before, rental from a partnership asset is calculated and returned at partnership level and only the net amount is allocated among partners, that is to say, after relevant expenses. So, if you wish to look at it another way, why should a partner be treated more favourably than others?
I don't say that I am right here, simply that I can see an alternative way of looking at it and I can rationalise that alternative. The OP will have to form a view and proceed as appropriate. The only way we will know what HMRC thinks is to ask them. It does not give one great confidence when advising a client, to say, "I'm not sure, but...."
Equally, as has been shown many times, you cannot rely on what someone in HMRC says. You have to get a definitive reply from the technical specialist responsible for that bit of legislation and that is not easy to achieve.
1st Aug 2020
Just to confirm, I was with you on this. But, the document on Gov.uk is what caused "my" problem.
Before I read that, I thought the only reason for the various "payment from" restrictions, was to prevent the sort of abuse you have referred to.
I could (should?) have settled for "the guidance is cr4p, ignore it" but I tried to find any possible reason why it might be correct.
That is what led to consideration of the type of issue referred to in my last post.
In that connection I noted the peculiarities around partnerships, with particular regard to property income.
I really don't want to but I will say a little more!
Generally speaking a person can have property income from several different types of source, rents from a property owned 100%, a property jointly owned with others (possibly various groupings) and different "types" (furnished, unfurnished etc). To generalise (overly) all these are lumped together and taxed. The notable exception is "partnership" property income. Not only is it kept separate, losses cannot be set-off sideways. Why is that (apart from the legislation says so)?
I couldn't think of any, obvious reason. So, digging further I read some of the stuff about partnerships and how this differed from a jointly let property. The answer (in again, very general terms) seems to be that partnership rental comes from a property owned by the partnership, that is to say it is a partnership asset. The essential difference seems to be the that the partners are not entitled to the income in a personal capacity (as such), rather they are entitled to a share in the partnership profits. Similarly, they don't own the property but have a share in the entirety of the partnership assets (think tenants in common vs joint tenants).
This may explain the wording of the S783BO exception. The person does not receive rent from the partnership but receives a "payment" from the partnership being his/her share in the partnership profits, part of which falls to be included in his/her computation of rental profits etc.
The stuff in the HMRC BIM82058 and PIM1030 is relevant / interesting.
Ignoring most of what is said above, the only thing that would seem to be particularly relevant is that, where there is a letting by a partnership, net profits are calculated at partnership level. What each partner gets is a share of the net profit. So, they have benefitted from deduction of relevant expenses already. It would therefore be inappropriate to allow them the Property allowance which is an alternative to deducting actual costs. Maybe that is why the Gov.uk doc says what it does and who knows, maybe it is correct!
1st Aug 2020
I agree pretty much all you say and my initial reaction was to share the interpretation. My problem came when I read into it and came to the document in the link I mentioned which did seem fairly clear. Of course, either or both of the HMRC docs could be wrong and examples are not often great, focussing on some, obscure , possible issue and missing altogether the obvious areas of potential doubt.
When I looked into the issue of partnerships (apart from my head hurting) I noted that rental from such is treated somewhat differently in that losses cannot be set against other rental income (and vice versa) and I wondered what possible explanations there might be. I came to the conclusion that it was possibly to do with the legal basis of ownership (interest in undivided share and all that) and as said in my last post, partnership rental profit is calculated at partnership level so deductions have already been given before any payment of shares is made to the partners.
It is one of those where one would like to ask HMRC for a definitive statement of their position (and an explanation) but that is not something one can easily achieve. Failing that, one is left to form a view which is defendable and perhaps make a white-space entry.
31st Jul 2020
I haven't really spent much time dealing with this sort of thing but I suspect there may be some significance to the fact that some income is "partnership". There are significant differences between property held jointly by 2 or more persons and property that belongs to and is let as a partnership.
In the latter case, the income is calculated at partnership level and each partner allocated an appropriate share thereof (the payment from a partnership?). The implication is that relevant costs have already been deducted in calculating the net income. So, the property allowance would be inappropriate.
31st Jul 2020
Firstly, did they say 18 March 2020? You really do need to pin them down.
We all know someone at HMRC is talking BS.
The ironic thing is that the COTAX system treats a loss carry-back - as a payment!
There really is no point trying to educate whoever you spoke to but I would be a little concerned that it has not been dealt with yet (even allowing for covid). If waiting for a repayment, I would be tempted to ring again and if you get the same rubbish ask to speak to someone who knows better! Given the comments about payment however, I assume that is not an issue (and perhaps just as well).
31st Jul 2020
I agree that the example could give that impression. If however you look at the legislation (S783BO) it simply refers to the individual having property income that includes "a payment made by a firm". S783BP is in similar terms referring instead to a close company. It also mirrors (as appropriate) the legislation on the "Trading allowance". I assume the purpose of these sections is to prevent any abuse that could arise but have seen nothing to explain.
As you say, the example is not great but would certainly support your view. However, if you start with PIM4410 there is therein a link to a document "tax free allowance on property and trading income". Go to that document and to the section on "when you cannot use the allowances". That clearly says the allowance cannot be used if you have property income from a partnership (with which you are connected).
It is certainly the case that the legislation is drawn widely enough to have that result and it may be that (as often happens) the example in the PIM is of something perhaps more unusual and misses the obvious.
30th Jul 2020
Have you read PIM4454?
29th Jul 2020
I think you need to look at the legislation and then the HMRC guidance on the subject.
What you will find from the former is no reference to assets or cash 20% or otherwise. Rather, relief is based on "activities". What you will find from the latter is that the amounts of cash and non-trading assets are simply factors that may be relevant in establishing precisely what activities are carried on and the extent of any non-trading such. It is a balancing act based on the specific facts of any particular case.
29th Jul 2020
In much the same way that you are ignoring the facts with constant references to "accrual" which is not what the OP was about. Nor, I would add, has anyone else argued about the correct treatment of such an accrual. As usual, you are creating an argument where none exists, quite possibly because you are too lazy (I hope it is only laziness) to read. Pity your clients.
29th Jul 2020
Are you perhaps confusing "number plate" with "registration number". The one is a physical bit of plastic etc attached to the car, the other is the right to use a certain series of letters and numbers. Have a look at CG76923.