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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My sister and I are planning to rent out my parents cottage

Resolved Question:

My sister and I are planning to rent out my parents' cottage following my father's death and mother's move into a care home with a dementia diagnosis. The rental income will be used to help fund our mother's care home fees, with rental payments going straight into her current account, the same one from which the care fees are taken by monthly direct debit. Is this a straightforward case where we will have to fill in a tax return for her each year and declare the rental income? Or is there more to this situation that we should know about?

The aim in keeping the cottage rather than selling at this point is to keep options open further down the line. If she lives a long time, we will sell the cottage to realise more cash for her. If she doesn't live very long, hopefully the cottage will remain in the family.

Many thanks,

Edith
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

You will have to complete a tax return on her behalf and report profit from property income on supplementary pages SA105.

You will be able to claim for any expenditure incurred on repairs and maintenance, property insurance etc against the rental income.

More information on allowable expenses can be found on SA105-notes Pages UKPN8-UKPN10 here

http://www.hmrc.gov.uk/worksheets/sa105-notes.pdf

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.


Customer: replied 3 years ago.


Thank you for this information. Can the rental income go on the general self-assessment tax return, as she also has some small investment income, as well as state pension and a small inherited teachers' pension from my father, also attendance allowance.


 


Presumably it is OK for me to fill in her tax return as I have financial power of attorney for her?


 


Thanks again.

Expert:  taxadvisor.uk replied 3 years ago.

Edith, thank you for reply.

If your mother receives a short self assessment tax return for completion then there is a section to cover UK Property Income.

If she receives a normal tax return then you have to add supplementary pages SA105 to the main tax return.

You can fill her tax return as you have financial power of attorney for her.

I hope this is helpful and answers your question.

Customer: replied 3 years ago.


What is the difference between the short self-assessment tax return and the normal tax return, and can you give me reference numbers/codes for the specific forms so I will know exactly what to ask HMRC for?


 


Thank you.

Expert:  taxadvisor.uk replied 3 years ago.
Edith, thank you for your reply.

A short tax return is SA200 and it consists of 4 pages.

A normal tax return is SA100 and it has 8 pages plus supplementary pages.
You can download SA100 and the supplementary pages from HMRC website where as SA200 is issued by HMRC.

More information on Self assessment forms can be found here

http://search2.hmrc.gov.uk/kb5/hmrc/forms/selfassessmentforms.page

I hope this is helpful and answers your question.

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Expert:  taxadvisor.uk replied 3 years ago.
I thank you for accepting my answer.

Best wishes.