Who has to pay tax on rent?

micrology

I'm buying a flat, which I shall rent out. I'd like my friend to be paid the rent (she has no money; I have). If the tenants pay her directly, do I have to pay income tax on the rent, even though I never see the money? Or does she pay tax on the rental income (if there is any to pay)?

(Context: She owns no property. We have no official relationship and does not live with me. I would be the sole owner of the flat. There is no mortgage. The flat would be rented to a third party - not to my friend).

Thanks for any help in resolving this.

Fire_Fox

You are legally the landlord so the money should be paid to you unless you are intending your friend to act as your official agent or you have a documented subletting arrangement. Otherwise it could look like tax evasion. You maf find you are both liable for income tax because you are both receiving a regular income (you are either gifting or paying a wage). You will be able to offset costs like landlord's insurance, buildings insurance, ground rent and service charges against your tax.

http://www.hmrc.gov.uk/incometax/index.htm
http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_10013435

somethingcorporate

If it's your property it is your rent to pay tax on.

micrology

Thanks! Very helpful.

Werdnal

Regardless of what you actually do with the rental income, the income is yours and you pay any tax due. Its the same was your wages - you spend it, give it away or save it for a rainy day, but the tax man still takes his due share, regardless of what you ultimately do with that income.

Are you aware of all the implications and legal obligations of becoming a LL? A good thread here, for starters:

http://forums.moneysavingexpert.com/showpost.php?p=41160642&postcount=12