who pays income tax ?

theartfullodger

Who will be named as "landlord"?? You or daughter??

If she is named as landlord you need a tenancy agreement between you & daughter (not an AST) that grants her the right to sublet, and on what terms etc...

Will daughter pass any of the rental income to you??

The clue is in the name "income tax": If you get an "income" (rent, boot sale, job, bank interest, eBay sales..) you are liable for "income tax".

'taint hard guys!

PS Have you or your daughter done any training or read any books on being a landlord & landlord/tenant law??

AdrianC

nellienellie wrote: »

I am landlady as my local council would only issue landlord/lady certificate to registered owner.

So you live in one of the few areas with mandatory council registration for private landlords, which means YOU have to be the landlord on the tenancy?

OK, I thought you meant she was on the tenancy as the landlord, and you were just concerned about the difference between the owner of the property and the landlord. In that case, that changes matters quite a bit. You originally said she will "receive" the full income. If she isn't the landlordl, she doesn't receive the rent in the first place. You are the landlord, it is your income. You can gift it to your daughter, but it is not her income.

You can pay her a fee to manage the property, and that would be regarded as a legitimate expense, but claiming an appropriate fee was 100% of the rent would definitely incur HMRC's interest if they investigated it.

AJ1982

LandyAndy wrote: »

I agree with this.

The HMRC aren't interested in whose assets are generating income, just who is receiving it.

It's INCOME tax and the income is hers.

Disagree, it could be construed by HMRC as Tax Avoidance on the actual property owners part.

mrginge

AJ1982 wrote: »

Disagree, it could be construed by HMRC as Tax Avoidance on the actual property owners part.

What, so as a higher rate taxpayer I'm not allowed to simply divert some of my income to my non-tax paying 'friend' which they then gift back to me a few months later?

I'm shocked. Surely this is just classed as efficient tax planning????

Brighty

mrginge wrote: »

What, so as a higher rate taxpayer I'm not allowed to simply divert some of my income to my non-tax paying 'friend' which they then gift back to me a few months later?

I'm shocked. Surely this is just classed as efficient tax planning????

Very tax efficient. My plan is to find a few 'friends' who earn under £10k a year, name them as landlords of my properties and then they pay zero tax on the rental income. They can then pass it on to me as cash in a brown envelope on a bench in the park. I'll be raking it in.

Brighty

AJ1982

mrginge wrote: »

What, so as a higher rate taxpayer I'm not allowed to simply divert some of my income to my non-tax paying 'friend' which they then gift back to me a few months later?

I'm shocked. Surely this is just classed as efficient tax planning????

Not sure if you are joking... But my original statement stands.

xylophone

https://www.gov.uk/renting-out-a-property/landlord-responsibilities

It seems to me that before doing anything, the OP should take advice from a qualified accountant to work out the most tax efficient way to manage the property income.

At the simplest she could simply ask the tenant to pay the rent to her daughter - in effect this would be a gift to her daughter so that it would be the mother/owner/landlady who would declare the income and pay tax on it.

Or she could employ her daughter to manage the property and pay her a wage for so doing.

This, however, makes the mother a landlady and an employer and raises other matters in connection with tax and NI and possibly even pensions.

Once again, professional advice seems the best way forward.

booksurr

AdrianC wrote: »

If your daughter is receiving the income, then your daughter is responsible for paying tax on the income. It's that simple.

no it isn't that simple, you have ignored entitlement. Think about the implications of a husband/wife scenario where one owns a let property but the other does not, especially where they are on different tax bands. A mother/daughter scenario is just the same and is addressed directly in tax law.

LandyAndy wrote: »

I agree with this.

The HMRC aren't interested in whose assets are generating income, just who is receiving it.

It's INCOME tax and the income is hers.

err, not so, again you ignore entitlement to receive the income

http://www.hmrc.gov.uk/manuals/pimmanual/pim1020.htm
"A person will carry on a rental business even if they engage an agent to handle it for them. The person carries on the business through the agent."

OP is the legal owner and is also (due to council requirements) the legal LL. The daughter has no legal interest in the property, so has no right to the income it produces.

The daughter is merely acting as an agent of the LL in that she collects the rent and manages the property on behalf of her mother who is the only person with the legal right to the income.

Mother has however decided to allow daughter to keep all income and (presumably) daughter also pays all costs associated with the rental business, therefore all net profits remain with her. As such daughter is indeed in receipt of untaxed income which she must declare and pay tax on in her own name.

To ensure that tax liability is not tracked back to the mother thus potentially leading to taxation of both mother (entitled owner) and daughter (physical recipient), it would be advisable for the mother to record a declaration of trust passing the beneficial interest in the property over to her daughter. Only when that is done will daughter obtain a legal interest in the property and therefore acquire a right to the income, until that is done the mother is the owner and is the sole person liable for tax on it.

Of course mother will also have to deal with the CGT implications later down the line when she sells as daughter currently is the beneficial (not legal) owner and is therefore liable for CGT whereas the mother as legal (but not beneficial) owner has zero CGT liability.

As Xylophone says - Take professional advice

bigfreddiel

A quick call to the tax office will clear this up as the replies in this thread shows no one actually knows, we're all totally clueless on this question, as is true on most other threads.

You may as well just ask someone down the pub.

Cheers fj

AJ1982

bigfreddiel wrote: »

A quick call to the tax office will clear this up as the replies in this thread shows no one actually knows, we're all totally clueless on this question, as is true on most other threads.

You may as well just ask someone down the pub.

Cheers fj

Myself and booksurr are right. Its those with the weird accounting idea/schemes which are wrong but I wish them luck when HMRC come knocking