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bigduckontax
bigduckontax, Accountant
Category: Tax
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Have an interest in a commercial property jointly owned with

Customer Question

Have an interest in a commercial property jointly owned with my 2 sisters, one of whom is non-resident. Property is a double fronted shop unit in East London with a value appx.--£650-700k. This property was inherited from parents appx 12 years ago with value then appx £350k. Rental income is currently £44k p.a. split 3 ways
Questions are as follows:
1/ My non-resident sister has not actually paid any income tax on her share of rent. Should the Revenue chase her and she is unable/unwilling to pay any tax liability are myself and my other sister liable (ie joint and several liability ) ? This same question also concerns CGT should the property be sold
2/ Will it be practical/possible to transfer my share of ownership in to my Collective Retirement Pension (and thus provide shelter from tax on income + gains tax) ?
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
Your non resident sister is liable for UK Income Tax on 50% of the net rental income. If she is an EEA citizen she does have a personal allowance of 10K [14/15 rates] to offset this. If her share is over BGP 2.5K then self assessment is mandatory even if in the end no tax is due.
Your sister can read about it here:
https://www.gov.uk/tax-uk-income-live-abroad/rent
No liability falls against you or your other sister. This raises a point; if this property is owned by the three of you then her share falls to one third, obviously. If she has not been self assessing then she might be liable to penalties and interest in undeclared tax from earlier years.
On sale of the property there would be CGT on any gain made. However, in the case of your non resident sister it is only the gains from residential properties where this applies, but you can see the way the wind is blowing and it is Budget Day tomorrow!
Normally a transfer to a pension fund might, and I only say might, be possible but remember that there is a 40K limit on pension contributions this year and your share is way above that. I have my doubts as to whether any fund would accept a property share as part of the portfolio.
I do hope I have been able to assist you with your question.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3115
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
Actually Budget Day is Wednesday!

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