Buy 2 let question - its the ownership that is important not the contract name

[CanPayButWouldRatherNot]

Buy2 let question from one of the lads at work......

He has their old flat owned 50:50 with his wife (who doesn't work) but has the letting contract in her name (he is a top rate tax paying permie).

I dont think he has this right and the contract should be in joint names and he is actually liable for the tax on his half.

What do you folks say ..........(other than ask your accountant?) :-)

[courtg9000]

Pretty sure that contract needs to be in both names.
Best to ask the managing agent as they should know best. Or is "one of the lads" trying to skimp on the 8-13% management fees by DIY'ing it too?

[SimonMac]

The contract will be between the tenant and landlord, the landlord is the property owner, if there are two owners then there are two landlords

[northernladuk]

The tenancy agreement and tax are two different things. I am the only one dealing with the tenancy agreements via an agent for my property that is both our names. I don't think it's important from the contract side.
Tax wise the propery is owned by both of you so any income is against the capital you both own so you both pay tax. Period.

[eek]

What everyone else said.

The only way to avoid the income being split 50-50 which appears to be the aim here is for the Mrs to own 100% of the property. which may be a problem if there is a mortgage but would be straightforward if there isn't.

[NowPermOutsideUK]

A very interesting thread. Just yesterday I have heard from a respectable educated accountant friend who has the property in his personal name at land registry but the income from the property is taxed via his ltd because of a one page document that he signed (without solicitors) confirming he was holding the property on trust for the ltd.

So the property is his as bare nominee but the income and tax and everything else is booked via the ltd

certainly interstaing and got me thinking a lot

so the tenancy does not in fact matter. Your wife could be the agent and sub letting it. Many different explanations possible

[eek]

A very interesting thread. Just yesterday I have heard from a respectable educated accountant friend who has the property in his personal name at land registry but the income from the property is taxed via his ltd because of a one page document that he signed (without solicitors) confirming he was holding the property on trust for the ltd.

So the property is his as bare nominee but the income and tax and everything else is booked via the ltd

certainly interstaing and got me thinking a lot

so the tenancy does not in fact matter. Your wife could be the agent and sub letting it. Many different explanations possible

That's an interesting tax tribunal you list in your first paragraph - I believe there are a number outstanding and it really falls apart when mortgages are involved.

[northernladuk]

That's an interesting tax tribunal you list in your first paragraph - I believe there are a number outstanding and it really falls apart when mortgages are involved.

So his pretend friend is trying to have his cake by owning the property personally but get the benefits of paying corp tax on the income not the higher rate if it were personally but when he sells it the company doens't have to pay corp tax on the profit of the sales? You can kinda see HMRC are not going to like that at all.

From what I've read in the past all the benefits of holding properties in trust have been eroded to point it's not worth it without good reason. I really don't think getting the best out of personal ownership but LTD tax is one of them. Sounds very much like investing in loss making film companys. That was possible and legal.. until someone looked in to it and then it wasnt'.

[ChimpMaster]

Buy2 let question from one of the lads at work......

He has their old flat owned 50:50 with his wife (who doesn't work) but has the letting contract in her name (he is a top rate tax paying permie).

I dont think he has this right and the contract should be in joint names and he is actually liable for the tax on his half.

What do you folks say ..........(other than ask your accountant?) :-)

A lot of what has been said in the other posts above is correct and an equal amount is incorrect.

Your 'friend' is certainly liable to 50% of the tax, and it will be a real stinker due to s24 and him being a HRT payer. However, the solution is simple: Declare beneficial interests in joint property and income - GOV.UK (www.gov.uk). The link will provide details so I won't say anything other than his accountant should already know this - else tell him to sign up with a reputable property account like Optimise.

BTW the Trust method will get you in trouble, for many reasons I don't have time to discuss here. A more reasonable option is for that person to use the Ltd Co as a 'property management company' that invoices him personally around 15% a year on the rental income. Smaller benefit but a recognised and legal way of diverting profits.

[eek]

A lot of what has been said in the other posts above is correct and an equal amount is incorrect.

Your 'friend' is certainly liable to 50% of the tax, and it will be a real stinker due to s24 and him being a HRT payer. However, the solution is simple: Declare beneficial interests in joint property and income - GOV.UK (www.gov.uk). The link will provide details so I won't say anything other than his accountant should already know this - else tell him to sign up with a reputable property account like Optimise.

BTW the Trust method will get you in trouble, for many reasons I don't have time to discuss here. A more reasonable option is for that person to use the Ltd Co as a 'property management company' that invoices him personally around 15% a year on the rental income. Smaller benefit but a recognised and legal way of diverting profits.

Did you miss this bit in the first page

You can use this form to declare a beneficial interest if you hold property jointly and:
• you actually own the property in unequal shares
• you're entitled to the income arising in proportion to those shares
• you want to be taxed on that basis

Do not fill in this form about:
• income to which neither of you is beneficially entitled
• partnership income
• income from commercial letting of furnished holiday accommodation
• income from shares in a close company
• income which for tax purposes is treated as income of a third party, even if the income arises from property held in your joint names
• property held as beneficial joint tenants where you are both jointly entitled to the whole of the property and income
• property that is not held in unequal shares (you cannot choose to have the income taxed on an unequal basis because you think it would be to your advantage)

All this form does is allow you to tell HMRC who owns what percentage.