Reply to: Buy To Let Question

[alex1011]

Now if this was for your wife/partner, then you could use a specific part of s836 Income Tax Act (ITA) 2007 which states that income from property jointly owned by spouses/civil partners who are living together to be the equal income of those persons i.e. 50/50 each - and that this can be overridden if a declaration is made under s837 ITA 2007 by way of HMRC Form 17.

I doubt this would work for a parent, but it's worth running by a Property Accountant. I won't recommend my accountant in this case because it's quite specialised and I don't want to ruin his day.

Otherwise, set your mum up with a Management Contract whereby she is responsible for managing the property and for collecting the rent. She can collect the monthly rent take a 20% fee and pass on the rest to you.

If 20% isn't enough then you might be stretching the limits of what you can do without bordering on tax avoision (yes I said the made-up word that exists in HMRC's heads ). You could sell her 50% of the house I suppose, but that will entail CGT and SLDT and then Inheritance Tax planning.

....
Thank you very much for the response. Yes unfortunately it needs to be more like 70%? - and it doesnt sound like from anyone else's ideas this is possible

[alex1011]

What the OP wants is called life rent. Look it up.
This is also the only legal way not to pay SDLT on second+ home.

...
Thank you very much for the idea I hadn't heard of this term, much appreciated. I have read about in on a few websites. As the property has a mortgage I dont believe it will work unfortunately

https://grigor-youngdotco.uk/propert...ions-answered/

[alex1011]

A fascinating question which I think a lot of people have wondered myself included

Basically the op would like to use someone as a tax mule who is not his spouse

Would be interested to know if anyone has actually done this and gone through a hmrc investigation

I’m guessing a back to back transaction where he rents it to his family who then sublets it at at a higher price might work together whether the family member can be an agent and take a slice.

Definitely interested in other peoples view

......

Thanks very much for this idea -its a good one although not sure it can work here. My Mum is mentally ill so cant be responsible for decisions/actions relating to the property. ie i manage it receive the income and pay the bills, i just give her the net income.

In the subletting structure you propose I assume it would only work if she could receive the income from the tenants/agents?

[alex1011]

Does you Mum spend this £1500 or perhaps give you back £1K in cash ?


Sent from my iPhone using Contractor UK Forum

I think are you asking if this is illegal tax evasion? No - I give my Mum all the income from the property each month. I have been paying tax on it and then transferring her the balance for a few years now and a friend said there might be another way of doing it that would enable me to give her more each month. I understand others might be wanting to set up an structure purely to pay less tax themelseves that is illegal- but thats not my situation.

[alex1011]

You could employ her? If she's over state retirement age there would be no NI to pay and just a bit of PAYE on the salary.

You then reduce what you take from your company by £1500 a month as you'll be keeping it.

Obviously, do the sums and make sure it adds up.

.....
Thanks for this Ladymuck ?

[ChimpMaster]

Now if this was for your wife/partner, then you could use a specific part of s836 Income Tax Act (ITA) 2007 which states that income from property jointly owned by spouses/civil partners who are living together to be the equal income of those persons i.e. 50/50 each - and that this can be overridden if a declaration is made under s837 ITA 2007 by way of HMRC Form 17.

I doubt this would work for a parent, but it's worth running by a Property Accountant. I won't recommend my accountant in this case because it's quite specialised and I don't want to ruin his day.

Otherwise, set your mum up with a Management Contract whereby she is responsible for managing the property and for collecting the rent. She can collect the monthly rent take a 20% fee and pass on the rest to you.

If 20% isn't enough then you might be stretching the limits of what you can do without bordering on tax avoision (yes I said the made-up word that exists in HMRC's heads ). You could sell her 50% of the house I suppose, but that will entail CGT and SLDT and then Inheritance Tax planning.

[anim]

Isn't that Scotland only?

I dont know. Likewise I dont know where the OP's property is. Just saying like.

[NowPermOutsideUK]

It must be. Never heard of it and I thought I had heard of the lot. Goes to show difference between England and Scotland despite all being part of Uk hmrc!!

[eek]

What the OP wants is called life rent. Look it up.
This is also the only legal way not to pay SDLT on second+ home.

Isn't that Scotland only?

[anim]

What the OP wants is called life rent. Look it up.
This is also the only legal way not to pay SDLT on second+ home.

[fullyautomatix]

Question is simple, can I avoid tax on my income.

Answer is simple, Nope.

[ladymuck]

Well I took the question at face value of someone helping their parent rather than using them as a money laundering tool.

I didn't realise an employee had to have a defined purpose if you want to give a person a regular income to help them make ends meet but still pay the right taxes.

The £1500 income from BTL goes to OP and they declare it on their SATR.
OP pays their mother a salary of £1500 a month from their company.
OP reduces the amount of drawings from their company by the amount they earn from the BTL.

Is that really illegal?

[BR14]

A fascinating question which I think a lot of people have wondered myself included

Basically the op would like to use someone as a tax mule who is not his spouse

Would be interested to know if anyone has actually done this and gone through a hmrc investigation

I’m guessing a back to back transaction where he rents it to his family who then sublets it at at a higher price might work together whether the family member can be an agent and take a slice.

Definitely interested in other peoples view

inneresting

[NowPermOutsideUK]

A fascinating question which I think a lot of people have wondered myself included

Basically the op would like to use someone as a tax mule who is not his spouse

Would be interested to know if anyone has actually done this and gone through a hmrc investigation

I’m guessing a back to back transaction where he rents it to his family who then sublets it at at a higher price might work together whether the family member can be an agent and take a slice.

Definitely interested in other peoples view

[eek]

You could employ her? If she's over state retirement age there would be no NI to pay and just a bit of PAYE on the salary.

You then reduce what you take from your company by £1500 a month as you'll be keeping it.

Obviously, do the sums and make sure it adds up.

What would she be doing to justify the salary - HMRC would see right through it if they went looking...