Shared ownership of rental property. Can one owner claim all the profit?

shorn

Hi, 

Quick question regarding an area I don't have much experience in. 

Myself and 2 brothers have all gone in on a buy to let property. We each put an equal share and we have a small mortgage split jointly between us. 

My question is regards to the ongoing management/running of the property. We'd like for one of my brothers to take on this responsibility. They can do all the work and they'll also get any profit generated from it. Obviously they'll be liable for any tax due too. 

Is this OK to do? Looking at HMRC, it states that the owners of the property are all liable to pay tax on any profits based the percentage that the own. 

If I'm reading that right?

Grumpy_chap

If I read the OP correctly, three individuals have purchased a BTL on equal shares.
The proposal is that one of the three individuals gets all the capital increase when the property is sold in the future.  Because that one will do all the management work associated with the BTL.

That could mean the one gaining substantially at whatever future point the property is sold.

Would it be simpler to allow the one to take a management percentage of rent before the residual is split equally?

km1500

all three of you are deemed to have 1/3 of the rental each for tax purposes and this must be shown on your tax returns. 

This is irrespective of who actually gets the money.

tightauldgit

I believe HMRC would say the rent income needs to be allocated to each according to the percentage of the property they own.

I presume third brother can be paid to manage the property though and that be an expense for brothers 1 and 2.  

ArbitraryRandom

Grumpy_chap said:

If I read the OP correctly, three individuals have purchased a BTL on equal shares.
The proposal is that one of the three individuals gets all the capital increase when the property is sold in the future.  Because that one will do all the management work associated with the BTL.

That could mean the one gaining substantially at whatever future point the property is sold.

Would it be simpler to allow the one to take a management percentage of rent before the residual is split equally?

I don't think that's it...? By my reading they're talking about three owners for one property - not selling, but one owner then renting the property (having a contractual relationship with the tenants and doing all management) and keeping the profits from the rental agreement. 

In that situation I would suggest a conversation with an accountant, but I believe (I stand to be corrected) a declaration of trust might achieve the desired result.

That is to say, the legal title can be owned by joint names and registered as such with the LR, and the beneficial interests (i.e. the right to receive rental income) can be held by the sole party wishing to declare the income on their tax return. 

shorn

ArbitraryRandom said:

Grumpy_chap said:

If I read the OP correctly, three individuals have purchased a BTL on equal shares.
The proposal is that one of the three individuals gets all the capital increase when the property is sold in the future.  Because that one will do all the management work associated with the BTL.

That could mean the one gaining substantially at whatever future point the property is sold.

Would it be simpler to allow the one to take a management percentage of rent before the residual is split equally?

I don't think that's it...? By my reading they're talking about three owners for one property - not selling, but one owner then renting the property (having a contractual relationship with the tenants and doing all management) and keeping the profits from the rental agreement. 

In that situation I would suggest a conversation with an accountant, but I believe (I stand to be corrected) a declaration of trust might achieve the desired result.

That is to say, the legal title can be owned by joint names and registered as such with the LR, and the beneficial interests (i.e. the right to receive rental income) can be held by the sole party wishing to declare the income on their tax return. 

That's exactly right. We have no plans to sell. It's been bought as an investment, we each own an equal share of the house. 

Obviously if at some point in the far future we did sell, then again, we'd each take an equal share. Until then my brother would take on the management, profit, tax of the property.  

I'd not heard if a declaration of trust before so will look into that.

theartfullodger

May I humbly ask what training or education have any of you done in how to be a landlord and/or landlord&tenant law, please?

anselld

Joint owners who are not married can split the income however they agree.  Agreement can be simple, deed of trust is not required.
https://www.gov.uk/hmrc-internal-manuals/property-income-manual/pim1030