Avoiding Income Tax on rental property

Senior_Paper_Monitor

By chance I have just quoted this to a client (so still on my clipboard) ....


Jointly owned property - no partnership


Where there is no partnership,the share of any profit or loss arising from jointly owned property willnormally be the same as the share owned in the property being let. But jointowners can agree a different division of profits and losses and so occasionallythe share of the profits or losses will be different from the share in theproperty. The share for tax purposes must be the same as the share actuallyagreed.

However, where the joint ownersare husband and wife, or civil partners, profits and losses are treated asarising to them in equal shares unless:

[*]both entitlement to the income and the property are in unequal shares, and
[*]both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

If a taxpayer’s only income fromland and property in the UK comes from a jointly owned property, that sharealone will form the rental business. If a taxpayer has other income from landand property in the UK, whether in their name alone or owned jointly with otherpeople, their share from the jointly owned property will form a part of theirrental business along with the other income and expenses on any other propertieswhich they own alone. Once again, however, shares held in a different capacity(partner, trustee, executor) must be kept separate.

cardiff_blue

Senior_Paper_Monitor wrote: »

By chance I have just quoted this to a client (so still on my clipboard) ....


Jointly owned property - no partnership


Where there is no partnership,the share of any profit or loss arising from jointly owned property willnormally be the same as the share owned in the property being let. But jointowners can agree a different division of profits and losses and so occasionallythe share of the profits or losses will be different from the share in theproperty. The share for tax purposes must be the same as the share actuallyagreed.

However, where the joint ownersare husband and wife, or civil partners, profits and losses are treated asarising to them in equal shares unless:

[*]both entitlement to the income and the property are in unequal shares, and
[*]both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

If a taxpayer’s only income fromland and property in the UK comes from a jointly owned property, that sharealone will form the rental business. If a taxpayer has other income from landand property in the UK, whether in their name alone or owned jointly with otherpeople, their share from the jointly owned property will form a part of theirrental business along with the other income and expenses on any other propertieswhich they own alone. Once again, however, shares held in a different capacity(partner, trustee, executor) must be kept separate.

You lost me after the first line! so can I say my wife is the rental business and all income goes to her, and therefore does not get taxed?

anselld

cardiff_blue wrote: »

You lost me after the first line! so can I say my wife is the rental business and all income goes to her, and therefore does not get taxed?

No, it still says the same as 00ec25 stated earlier.
You must actually own unequal shares to split the income unequally. (if married). You cant just decide and send a form to HMRC.

00ec25

cardiff_blue wrote: »

From what I can find on the HMRC website shows the limit for 2013 to 2014 to be £32,011 am i missing something?

oops no you are quite right, I was sloppy in answering this on autopilot and missed out the vital word OVER 41,450

tax always works to the nearest whole pound so as you rightly say the 40% bracket starts at 32,011 as you have seen on HMRC

http://www.hmrc.gov.uk/rates/it.htm

00ec25

cardiff_blue wrote: »

so can I say my wife is the rental business and all income goes to her, and therefore does not get taxed?

no
what senior paper monitor quoted is a different section of the HMRC bible where they deal with partnerships. It is a fairly technical page whose gist is that it is very difficult to establish that a partnership (in accountancy terms not in sex terms) actually exists and therefore only at the bottom of the page does it then mention married couples. this is the original that senior paper monitor got it from if you want to read it, but as I say the only bit relevant to you is right at the bottom http://www.hmrc.gov.uk/manuals/pimmanual/pim1030.htm and so I much prefer quoting the page I used earlier as that deals only with married couples

to save you opening the original link, I have underlined and coloured the key bits, the answer in your case remains as stated before your split is 25 you 75 wife because that is the split of how you actually own the property. What is it you are not understanding?

TSEM9850 - Property held jointly by married couples or civil partners: Form 17 rule - declaration must reflect reality


Married couples and civil partners do not have a general option to have income taxed in any way they like. They can depart from the standard 50/50 split for tax purposes only where

• each spouse or civil partner is in fact entitled to a share other than 50/50 in the property and
• the share that a spouse or civil partner has in the income is the same as their share in the property

A declaration cannot be made where a husband and wife or civil partners own property as beneficial joint tenants. In these circumstances the couple do not own the property in shares at all, but are entitled jointly to the whole of both the property and the income. This is distinct from the situation where the husband and wife or civil partners own property as beneficial tenants in common where they are each entitled to specific shares in the property and the income arising.

anselld

00ec25 wrote: »

Your split is 25 you 75 wife because that is the split of how you actually own the property

Unless I missed it the OP has not actually stated that is the ownership.

The OP said "if I inform HMRC the ownership is 25 75 .... etc". They didn't state that was actually reality.

00ec25

anselld wrote: »

Unless I missed it the OP has not actually stated that is the ownership.

The OP said "if I inform HMRC the ownership is 25 75 .... etc". They didn't state that was actually reality.

well spotted that man ! My chief weakness, assuming too much when reading!

if 25/75 is not your respective actual TIC shares then you cannot tell that to HMRC