Buy-to-let partnership - tax advice

NAVYBOY1980

Hi,

I currently own a property and rent it out, my partner does exactly the same. We are toying with the idea of buying 1 or 2 more together and registering as a Partnership so in total we'll have 3 - 4 properties.

I query is tax on the profits - Because i earn £36000 in my full-time job if we split the profits 50/50 that would mean i would be charged the higher rate of tax.

Is it possible/legal for my partner to take a bigger share (nearly all) of the profits as this wont push either of us into the higher tax band?

Can we just decide at the end of each year who gets what or is it a more formal process and have to register what percentage of the company is owned by each partner?

Its my first post so sorry for rambling on and any advice would be most welcome!

Thanks

Stu

roger196

Hopefully my views are still in date, as it is some years that I did much with partnerships. If updating is needed, I am sure someone will post the current position.

A partnership can split income profits and capital profits in any share it likes. Its worth getting a written agreement drawn up to avoid disputes in the future. I would suggest using a qualified accountant to do this. HMRC's interest is usually whether a partnership genuinely exists or not.
Remember that each partner is responsible for the whole of any p'ship debt and can take decisions which bind the partnership. Be careful if either of you fall out or get into debt. AFAIK, a LLP cannot be used for BTL as it is not trading.

antrobus

roger196 wrote: »

...A partnership can split income profits and capital profits in any share it likes.... HMRC's interest is usually whether a partnership genuinely exists or not...

That's about right, and HMRC will particularly be interested in whether or not there is a partnership business. Roughly speaking, in order for the BTL venture to be taxed as a partnership there must be a business that exhibits a "similar degree of business organisation as in an ordinary commercial business".

PIM1030 - Introduction: jointly owned property & partnerships
http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm