Income from Tenant in Common arrangement

by **IanW54** on Wed Jan 11, 2012 11:27 am

My wife and I are purchasing a property for my son and his friends to live in whilst at university for the next 5 years. We are both 40% tax payers and are keen to minimse our income tax from the rent. The property is being bought as a cash purchase. I have read about the use of Tenants in Common splitting the ownership. Some sources say that the rental income is taxed in proportion to the percentage ownsership. Others that the two are independent. i.e if my wife and I have 99% and my son 1% then he could receive 100% of the income. Can anyone assist in providing a definitive statement on how I should set up the purchase. My solicitor is not well versed in this sort of arrangement and I want to get it correct from a tax perspective.

by **section 44** on Wed Jan 11, 2012 11:42 am

IanW54 wrote:Can anyone assist in providing a definitive statement on how I should set up the purchase.

What would one of those be? A decision, on identical facts, from the Supreme Court?

Some people think one thing, others another. HMRC have inconsistent views. You take your chances and hope for the best or you play safe and allocate the rental income in proportion to beneficial ownership of the property.

by **pqtaxation** on Wed Jan 11, 2012 12:31 pm

IanW54 wrote:My wife and I are purchasing a property for my son and his friends to live in whilst at university for the next 5 years. We are both 40% tax payers and are keen to minimse our income tax from the rent. The property is being bought as a cash purchase.

An alternative may be for your son to buy the house with your lending him the money interest-free as a documented secured mortgage . That way, he should also qualify for main residence relief for CGT when house is sold.