Jointly owned & Rental Income

by **armani** on Sat Sep 17, 2011 8:47 am

Hello I'm new to this website.

I was hoping someone could help me?

I live & work in the UAE & am financially secure.
Unfortunately, this is not the case for my sister.

We will inherit our mother's house (due to her death) once everything has been processed.
What I would like to do is let my sister rent out the property to help her pay her own mortgage.
She would be responsible for everything & receive ALL of the rental income.
It also saves me the hassle of filling out tax returns too.

I believe that the first £4500 (or there abouts) of rental income is not taxed?
This is normaly split 50/50 if there are two parties involved. Am I right?
When filling out her tax return is it possible for her to use this full amount?
Is there anything special we would need to do or can I just let her get on with it?

Have I missed or misunderstood anything?

Any information or advice would be greatly received.

Armani

by **armani** on Sat Sep 17, 2011 9:08 am

Sorry I realised I may not have made myself clear.

My mother's property & my sister are in the UK

Armani

by **Peter D** on Sat Sep 17, 2011 10:37 am

You can apportion the rental income with a simple letter agreed and signed by both parties. The entire rental will be added to your sisters normal income and taxed at the resulting marginal threshold.
I do not know where you get £4,500 from, may be you got it mixed up with rent a room relief which does not apply in this scenario. Regards Peter

by **armani** on Mon Sep 19, 2011 12:49 pm

Thankyou Peter.
Sorry for the dealy I wasn't expecting an answer quite so quick!

You say I can apportion the rental income with a simple letter signed & dated by us both.
Could you give me a little more information on this at all?
What should be written?
Or is there a website somewhere where I could find a template for this?
Does it also have to be witnesses or produced by a solicitor?
Then does my sister send it to the HMRC or keep it "on file"
Once again
Thank you

Armani

by **Peter D** on Mon Sep 19, 2011 2:24 pm

Just declare that you ( by full name ), although a joint legal owner of property XYZ, make your sister (full name ) 100% beneficial owner of the property from date ABC.
Signed Brother Date
Signed Sister Date

There is no requirement to detail this via a lawyer or to HMRC and only if they request it.

Remember that when you sell the property your sister will have a UK CG allowance put as you have no Beneficial ownership then you will not but that may not matter in your case as I assume you are UK non resident.

Regards Peter

by **section 44** on Mon Sep 19, 2011 3:36 pm

Do you want your sister to have 100% of the capital of the property (i.e. if anything was to happen to you, then the value of the property would belong to your sister and would not form part of your estate)?

by **armani** on Mon Sep 19, 2011 6:03 pm

Thank you Peter D & Section44 for the replies

Sorry I'm alittle confused here?

By stating that I'm making my sister the "100% beneficial owner" am I saying that she is welcome to the income made from the rental or am I actually giving her the house?

Please explain if you would.
Could you explain the Beneficial ownership a little more.

Also are you saying that if we sell later then she would get the £10600 relief & I would not.
I have been non resident for longer than 5 years so with the new CGT rules I'm not liable anyway.
Or have I got that wrong too?

Thank you

Armani

by **section 44** on Mon Sep 19, 2011 6:54 pm

Beneficial ownership is all about the value. Legal ownership (that is, being the registered proprietor at the Land Registray) is pretty much worthless.

Suppose I handed £100 to you and asked you to hold it for my benefit. Legally you may hold £100 but, assuming that you honour the arrangement, you're not £100 better off because the £100 is for my beenfit (as the beneficial owner) and not money that you can spend.

by **maths** on Mon Sep 19, 2011 7:00 pm

There appear to be two separate issues:

1. do you want to continue to own the property with your sister following inheritance.

2. do you want her to have 100% of the rental income from the property (and incur the expenses).

by **armani** on Tue Sep 20, 2011 5:03 am

Hello section 44

Phew! This feels too much like legal jargon for me!
I know I did ask what Beneficial ownership meant as I thought it would make me understand better.
I'm sorry but I'm having difficulty to understand your example in relation to what I would like to do for my sister.
I am proposing my sister uses the house for her benefit, not mine?

As I said previously, I'd like to know whether signing a letter making my sister "Beneficial owner" (as suggested by Peter D) is giving her permission to take the rental income or giving her the house?

Maths

In answer to your questions:

1: I think I will probably keep part ownership
2: Yes, I would like my sister to have 100% rental/expenses etc

Armani