BTL - house in one name, income to another

Yorkie1

I rather suspect that G_M's tongue is firmly in cheek?

Yorkie1

Froggitt wrote: »

Indeed. So my thought was that its not income in the way income tax is e.g. there's no NI etc. Its investment income that we would like to go directly to Miss Smith.

Income is income. I have to pay tax on the interest from savings in the same way that I do from my job.

davidmcn

Froggitt wrote: »

Mrs Smith wouldn't give the money to Miss Smith.......Miss Smith would get it directly from the renters.

It amounts to the same thing - Mrs Smith is the one entitled to the rent (she has to be the landlord on the lease), so there's still consideration by the tenants to Mrs Smith, albeit that she's asked them to bypass her and pay it directly to Miss Smith. There's no contract between the tenants and Miss Smith. From a tax point of view I don't see it as being any different to the money going to Mrs Smith's bank account and immediately gifted to Miss Smith.

Kynthia

Froggitt wrote: »

Mrs Smith wouldn't give the money to Miss Smith.......Miss Smith would get it directly from the renters.

It's the same thing though isn't it, just with tax avoided or evaded? Unfortunately I think it's evasion and the HMRC would expect Mrs Smith to pay tax as if she received the income and paid the expenses. The HMRC will confirm though.

00ec25

all very basic stuff which is easily googled

Miss Smith and Mrs Smith are not married (I assume!) and therefore could ...
Either: Miss Smith lives there as her main home (which it would be if she were a student) and the renters as her LODGERS with Miss Smith therefore responsible for ALL aspects of being the LL, Mrs Smith gets NO income
Or Miss Smith does not live there but sets up a beneficial ownership arrangement. Such would have to be formally documented and is best done via a solicitor...."The burden will be on the person seeking to show that the parties did intend their beneficial interests to be different from their legal interests, and in what way. This is not a task to be lightly embarked upon."http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9140.htm

LINK: http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM9000.htm concerned only with the ownership of income-generating property that results in income tax liability. The guidance covers the position under the law of England and Wales only

LINK: Ownership and income tax: legal background: ownership - income follows propertyThe starting point is that whoever has beneficial ownership of the property (or part of the property) has beneficial ownership of the income (or the respective part of the income).

LINK: Ownership and income tax: legal background: ownership - beneficial owner The beneficial owner is the person for whose benefit the property is held. It is distinguished from the person in whose name the property is held (the legal owner).

LINK: Ownership and income tax: legal background: ownership: legal and beneficial ownership - separation The legal and beneficial ownership of property may be separated by a valid declaration of trust.

payless

Is Miss smith also living in the property.?

If so perhaps mrs smith rents to miss smith at nominal rent ( means can't claim any losses).
Miss sub lets and the income falls under tax allowance or even rent a room?

Not positive , just throwing into the arena

Froggitt

No she is not. I wonder if that is within tax laws.

Froggitt

Maybe it could be accomplished by putting the property in a company with A and B shares.......with 99 A shares (the voting shares) to Mrs Smith, and 1 B share to Miss Smith, and the B share is the only dividend bearing share.

00ec25

Froggitt wrote: »

No she is not. I wonder if that is within tax laws.

if she does not live there then she cannot have lodgers and cannot use the rent a room scheme BUT please read the links I provided, your answers are all in there, I am sure you can manage to replace David and John Smith with the relevant names...

http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM9520.htm
Example - written declaration of bare trust
“I John Smith declare that I hold the property described as XXXXX for my son David Smith absolutely”

or

‘I John Smith declare that I hold the property described as XXXXX on trust for my son David Smith’

The declaration is signed by John Smith and dated. There is no need for the beneficiary even to be aware of the declaration of trust, so David's signature is not required.

There is no ambiguity in the use of ‘declare’. Either of the above declarations means that John holds the property as trustee for David. David has the beneficial interest in the property and is entitled to the property and any income derived from it.

Froggitt

Thanks 00ec25. I know nothing about trusts.


So, it we sign a Mrs Smith hold the property on trust for Miss Smith, Miss Smith can get the income. Does that mean Mrs Smith makes all the decisions? What about decision to sell the property? When does it pass to Miss Smith?