How to apportion rental income?

anselld

Currently property owned TIC 1%/99% split between husband and wife. Form 17 submitted to split income in these proportions.

To far, so good, no problem.

So now, add another property but this one owned 50:50 shares.

So how is the overall apportionment calculated? On the asset value, or on income?

I am thinking asset value, so say ...
Property 1 value 100k - 99k wife, 1k husband
Property 2 value 50k - 25k wife, 25k husband
Overall split 124k wife, 26k husband, ie 83%/17%

Will this cut it with HMRC?

nomunnofun

Not sure why 'overall apportionment' is relevant. Income should be calculated on each property according to the share appropriate to that property

anselld

nomunnofun wrote: »

Not sure why 'overall apportionment' is relevant. Income should be calculated on each property according to the share appropriate to that property

That would imply keeping separate accounts for income and expense for each property. Seems tedious, plus certain expenses are not specific to an individual property. Surely it cannot be necessary to keep separate accounts for each property in a portfolio.

00ec25

anselld wrote: »

That would imply keeping separate accounts for income and expense for each property. Seems tedious, plus certain expenses are not specific to an individual property. Surely it cannot be necessary to keep separate accounts for each property in a portfolio.

as nomunnofun says, those are the rules
for married couples income must be split per ownership/ Form 17 , no alternative
follows therefore that expenses must mirror the income

anselld

So, in that case, if I am understanding you both correctly....

Say rental income property 1: 10,000 9,900 wife, 100 husband
rental income property 2: 5,000 2,500 wife, 2,500 husband

Overall income 12,400 wife, 2,600 husband (83%, 17%)

Can expenses therefore be apportioned 83%, 17% in accordance with income?

nomunnofun

anselld wrote: »

So, in that case, if I am understanding you both correctly....

Say rental income property 1: 10,000 9,900 wife, 100 husband
rental income property 2: 5,000 2,500 wife, 2,500 husband

Overall income 12,400 wife, 2,600 husband (83%, 17%)

Can expenses therefore be apportioned 83%, 17% in accordance with income?

You appear to have ignored our previous answers, it would appear, particular 00EC25 when he states that expenses must mirror income.

Example:

Property 1 - Income 11000 less expenses 1000 = profit 10000. Apportioned 9900 and 100.

Property 2: Income 10000, expenses 2000 = profit 8000.
Apportioned 4000 each.

Total profit 18000
Apportioned 13900 and 4100

Each property is calculated and declared separately.

jimmo

This is, pretty much, the standard link to HMRC for jointly owned properties.

http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm


Para. 2 says “the taxpayer’s share from the jointly owned property will be included as part of their personal rental business profits.”

Therefore, in this example, the husband has a personal rental business which consists of a 1% share of the profits from the letting of property 1 plus a 50% share of the profits from property 2.

Similarly the wife’s personal letting business consists of a 99% share of the profits from property 1 plus a 50% share of the profits from property 2.

However nobody, or no entity, has a rental business which consists of letting the entireties of properties 1 and 2. Therefore there is no scope, or point, in producing accounts for a non-existent entity.

anselld

nomunnofun wrote: »

You appear to have ignored our previous answers, it would appear, particular 00EC25 when he states that expenses do not mirror income.

I have not ignored them, but clearly I am struggling to understand! Besides, 00ec25 stated expenses *must* mirror income.

nomunnofun wrote: »

Each property is calculated and declared separately.

OK, that is clear enough for me to understand. What about expenses which are not property specific? There probably are not many, but eg membership of LL organisation.

nomunnofun

anselld wrote: »

I have not ignored them, but clearly I am struggling to understand! Besides, 00ec25 stated expenses *must* mirror income.

My mistake - I do apologise.

nomunnofun

anselld wrote: »

OK, that is clear enough for me to understand. What about expenses which are not property specific? There probably are not many, but eg membership of LL organisation.

Claim against the individual property to which this expense relates.

anselld

nomunnofun wrote: »

Claim against the individual property to which this expense relates.

Thats the point though, in this case it does not relate to an individual property. You would only join a LL organisation once regardless how many properties you have.