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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13915
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I currently have 9 properties owned by myself and my husband

Resolved Question:

I currently have 9 properties owned by myself and my husband and managed by me, I am looking to set up my own sole trader business in order to claim a wage and also expenses for carrying out this role, currently the housing business is out through my husbands personal tax code but I don't know if this is the most efficient way of doing this as he is a high earner. Are you in a position to advise if this if there are better ways or could you advise me where to go within this site to seek advise
Submitted: 3 years ago.
Category: Tax
Expert:  T_Graham12 replied 3 years ago.
Hi,

This is probably a tax question.

I will ask that this is transferred to the UK Tax category and someone will assist.

Probably best to make a cup of tea though, because you may have to be a patient.

Kind regards,

Tom
Customer: replied 3 years ago.

Many thanks for your assistance, whilst having to I will make a start of the lease for the property, thanks for your advise again
Expert:  T_Graham12 replied 3 years ago.
No problem
Expert:  Sam replied 3 years ago.
Hi

Thanks for your question I am Sam and I am one of the UK tax expert here on Just Answer.

First can you clarify that the properties are in joint names, if so, is there any reason you do not declare half of the rental income, as things currently stand?

Secondly please note that whilst income is liable on both you and your husband on jointly owned properties - wages are not an allowable expense from the rents you receive, as you both own the properties, and the only way to do this, is if it were a limited company, but a limited company has to have a trade linked to it, it cannot just be rental income.

I shall await your response to see if there is anyway any tax can be mitigated.

Thanks

Sam


Customer: replied 3 years ago.

Hello Sam

There are some of the rentals that are in my husbands sole name.
I have set up as a sole trader offering a varied amount of services to a varied base of customers, from sourcing concert tickets and planning events thru to recruitment of IT specialists. I have just applied for a renewed self assessment code and registration. Currently our portfolio of properties have a large capital gains allowance against them , in the region of 60k due to the history of necessary repairs and upgrade. This is within my husbands personal tax return. I do not know how to go about claiming allowance on the joint properties, advise in how to do so would be good.

Would I be able to claim expenses for managing the properties solely in my husbands name ?
Expert:  Sam replied 3 years ago.
Hi

Thanks for your response

For those properties are in joint names, you should be declaring half of the rental income and expenses on those, and your husband declaring his half share and the ones in his sole name, and unless those in his sole name are transferred also into your name or just into your name, then you cannot better the tax position on the net rents.

You also then are a sole trader for your word sourcing tickets for events and concerts, and as its a trade is self employment and can be declared as such, but this cannot be combined with the rental income under the guise of sole trader, as rental income is subject to what was known as Schedule A taxation, And you cannot merge this into a limited company, as the rental properties play no part in the trade.
If a business owns properties, either for its own use, or as part of the business structure, then the rental income can be declared through a business, but this is not the case here.

Please also note repairs are not permitted against a capital gains, just capital improvements (such as new bathroom, kitchen etc) and these can only be realised once a property has been sold - so that it can be deducted from any gain made on the ale.
Repairs should be claimed against the rental income each year - along with other day to day expenses, such as mortgage/loan/buy to let interest, advertising, insurances etc

So if you have an income of less than £42,475 - and your husband has an income greater than this, the ensure you are declaring the half share of rental income that relates to the jointly owned property AND also review whether any of those properties in his sole name can be either
1) Transferred solely to you OR
2) Half share transferred to you

The cat of making these transfers will NOT trigger a capital gain - as your are married, so it would be a cost effective way of managing the rents to maximise the 20% rate band for tax purposes.

Then you would also benefit from two sets of annual exemption allowances, if more were in joint names. But if any are to be transferred into your sole name, then once you are thinking of selling any of the properties. make sure, that the tax year PRIOR to sale, you transfer them back to joint names, to again benefit from two sets of annual exemptions (currently £10,900 per person, to rise to £11,100 from 06/04/2014)

As for whether you can claim expenses for managing properties in your husbands sole name - as long as you can substantiate that you do all the work, and this represents the actual time that you spend servicing the properties and/or your out of pocket expenses, then there will be no issue with HMRC. Just keep very detailed and accurate records of what you are paid, and time spent undertaking this work, as this is the type of situation that HMRC swoop onto, if they feel what you are paid v the time spent - is unequal, especially as you are connected persons.
You would then need to set yourself up for this self employment as a separate entity as a sole trader, as a managing agent.

Thanks

Sam


Customer: replied 3 years ago.

Thank you very much that is very clear.

Lastly can I claim mileage and costs rather than a wage as this seems to be what is more acceptable?

amanda
Expert:  Sam replied 3 years ago.
Hi Amanda

Thanks for your response and further question

Yes even better ! - 45p a mile for the first 10,000 miles and then 25p a mile for any mileage over and above, and any out of pocket expenses too

Thanks

Sam

Customer: replied 3 years ago.

Thanks Sam and this is backed up by a mileage visit log ?

Great advise and really helpful

thankyou
Expert:  Sam replied 3 years ago.
Hi Amanda

Yes - then this covers all questions that might be raised
It should show, when, where and the mileage and any parking expenses (such as car park/meter charges)

Thanks

Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13915
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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