Home› For accounting professionals› General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Husband & Wife rental income

JJH1969JJH1969 Feels At HomeStaffordshireRegistered Posts: 110
in General accounting discussion
A husband and wife own a property 50/50 but want to be taxed on it 10/90 to reflect the work the wife has done managing the property and drawing up agreements (she is a solicitor). I know they have to be taxed 50/50 but could she set up as a sole trader and then the invoice be deducted as a business expense?

Comments

  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    No, HMRC will insist on 50/50 if the property is owned jointly. The only way around this is get the partner to gift the property to the other and then the latter can be taxed on 100% of the profit.
  • JJH1969JJH1969 Feels At Home StaffordshireRegistered Posts: 110
    Thank you - does that have to be done through a solicitor?
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Yes, a solicitor can do a transfer of the ownership.
  • NatsmommaNatsmomma Feels At Home Registered Posts: 39
    I agree, not possible as the ownership percentages detained the rental split.

    It is not possible to invoice your own business for work done, so self employment is not a solution either. Of course, husband could give up 4/5 of his rental income to his wife, but this doesn't help the tax position.
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Couple of options:

    As TC says a proportion of ownership can be gifted (does not have to be 100%). No CGT as inter-spousal. Will need to be formally drawn up either as a trust deed or a conveyance plus HMRC have to be notified in advance of the tax year in which you are changing the split so not immediately effective. May have a stamp duty issue to consider, may affect the mortgage..

    If the tax is worth it then W could set up an LTD to manage the property and invoice them for her fees.
  • JJH1969JJH1969 Feels At Home StaffordshireRegistered Posts: 110
    Sorry about this but they aren't actually married - just partners!
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Then I don't think any of this is possible. It may have to be 50:50. Worth checking with a solicitor though.
Sign In or Register to comment.