Rental income tax

Grumpy_chap

[Deleted User] said:

If the two owners are not married to each other and have agreed to share income, say, 80%:20%, they would not need to make an election to do that.  They would have just agreed to do that between themselves. 

Assuming that ... there is no jiggery-pokery going on with behind the scenes payments, there does not seem to be any tax law to override that.

Assuming the two owners are not married and there is no jiggery-pokery going on...

The owners are the OP's Dad and the OP, so that satisfies your "not married to each other" criteria, however in this case there does seem to be some "jiggery-pokery going on" and there are "behind the scenes payments":

pavvers said:

So the situation is that my dad and I co-own a single buy-to-let property (ourselves, not through a company). 

my dad and I can split the rental income from the house in any proportion we choose.  The ratio we have agreed is that he takes 100% and I take 0%.

We have agreed the above split because my dad is a basic rate tax payer and I am a higher rate.

what are the implications of my dad gifting me an amount of money?  Arguably it could be any amount of money, but for the sake of this scenario, the amount is equal to half of the remaining net profit after the mortgage has been paid.  

The idea of the 100% - 0% split of income and then the gifting back 50% of the profits, all because of respective income tax bands of the two individuals does very much appear to be "jiggery-pokery" as any layperson would see it.
I am not sure whether "jiggery-pokery" is an official term in HMRC tax manuals - there is probably a more professional manner of expression employed.

mybestattempt

If a valid deed was executed assigning 100% of the property income to the father then the settlement provisions kick in as the son, because he as the settlor, retained his 50% beneficial ownership in the property.

So, he would still be liable to tax on 50% of the property income.

I'm not sure if the OP is still reading, but hopefully he now understands he has made incorrect tax returns for as many years as he has omitted 50% of the property income from them.

Just to add, it would certainly improve PM1030 if that guidance gave specific detail about the correct allocation and the effect of reallocation of property income between joint owners rather than use words like usually and occasionally.

mybestattempt

If a valid deed was executed assigning 100% of the property income to the father then the settlement provisions kick in as the son, because he as the settlor, retained his 50% beneficial ownership in the property.

So, he would still be liable to tax on 50% of the property income.

I'm not sure if the OP is still reading, but hopefully he now understands he has made incorrect tax returns for as many years as he has omitted 50% of the property income from them.

Just to add, it would certainly improve PM1030 if that guidance gave specific detail about the correct allocation and the effect of reallocation of property income between joint owners rather than use words like usually and occasionally.

mybestattempt

Apologies for the duplicate post, I'm not able to edit/delete it.

mybestattempt

Thanks, it seems that I need to make a number of posts to get a "toggle" at the top right to allow me make changes.

sheramber

mybestattempt said:

If a valid deed was executed assigning 100% of the property income to the father then the settlement provisions kick in as the son, because he as the settlor, retained his 50% beneficial ownership in the property.

So, he would still be liable to tax on 50% of the property income.

I'm not sure if the OP is still reading, but hopefully he now understands he has made incorrect tax returns for as many years as he has omitted 50% of the property income from them.

Just to add, it would certainly improve PM1030 if that guidance gave specific detail about the correct allocation and the effect of reallocation of property income between joint owners rather than use words like usually and occasionally.

OPis pursuing this on another post 

https://forums.moneysavingexpert.com/discussion/6509644/btl-remortgage-predicament#latest

mybestattempt

I believe this thread is a follow on prompted by the responses he got about the income tax position in the thread on the mortgages board which you have referenced.

He hasn't posted on that thread since 5th March but references it in his opening post on this thread.