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Where Taxpayers and Advisers Meet

Who is responsible for paying the tax

Mihat1962
Posts:2
Joined:Sat Feb 13, 2021 7:44 pm
Who is responsible for paying the tax

Postby Mihat1962 » Sat Feb 13, 2021 8:00 pm

I could do with some clarification on a tax issue.
we have written a letter authorising my father in law to manage all aspects of some buy to let properties we own . The rent goes to him and he pays the mortgages, he effectively acts as a landlord. We have never had any income from these properties ( and we are happy for him to continue getting the income) MY question is : is he responsible for paying the appropriate tax on the rental income from these properties, as a: he receive all the benefit and b: we have written a letter asking him to handle all matters relating to the properties or because the legal ownership of the properties is in our name, does the liability fall on our shoulders?

I am concerned that he may not be paying the tax or the right tax, as he refuses to give us any details on the finances. What should I tell the tax office?

Appreciate any legal and tax advice.

Mihat1962

maths
Posts:8285
Joined:Wed Aug 06, 2008 3:25 pm

Re: Who is responsible for paying the tax

Postby maths » Sat Feb 13, 2021 11:09 pm

Basically, income tax is levied on individuals who are beneficially entitled to the income. In your case this would seem to be you not your FIL.

The fact that FIL receives the rents an "pays" the mortgages is to an extent irrelevant.

Technically rental income can be assessed on your FIL (not you) as he de facto receives the rents but HMRC would typically expect you to include on your tax return rents less expenses. They would normally only chase your FIL where they failed to know about you which is most unlikely.

If FIL declares the rents on his tax return he's unable to deduct any mortgage interest (as expense or tax credit) for income tax purposes. The mortgage is no doubt in your n to FIL's name.

This doesn't make sense: "as he refuses to give us any details on the finances".

Mihat1962
Posts:2
Joined:Sat Feb 13, 2021 7:44 pm

Re: Who is responsible for paying the tax

Postby Mihat1962 » Mon Feb 15, 2021 10:49 am

Thank you for your response,
Relationships have gone sour over the past few years. The whole thing was done in good faith and to help him out with income in his old age. A few years ago when we tried to get a mortgage we couldn't as all the debt shows up in our name and we can't prove income against the debt. His deep reluctance to set up a joint account to show rental incoming coming in , raised a suspicion as to why. When asking him about the tax , he say's he has paid , but wont provide any evidence. We are concerned that the tax liability if it on on is building up, Should we advise the Tax office tat he has been receiving all the rent and he has a letter of authority to handle the affairs? Is there a form tat needs filling in or a simple phone call? Our worry si if he hasn't paid any tax and we become liable we could loose our family home as we don't have funds to pay a big bill -- No good deed goes unpunished, appears to apply here.!!

maths
Posts:8285
Joined:Wed Aug 06, 2008 3:25 pm

Re: Who is responsible for paying the tax

Postby maths » Mon Feb 15, 2021 10:01 pm

HMRC will, of course, not disclose information to you about father in law.

What you might like to do is write to FIL asking him to confirm he has filed tax returns re the income and ask for copies.

Inform him in the letter that should he fail to respond in say 14 days you intend to write to HMRC informing them that as far as you are aware FIL has been receiving rents but not declaring them.

The above may "frighten" him.

However, you need to bear in mind that HMRC may as I indicated in my post ask you to pay the tax as you are beneficially entitled to it even though father actually receives it.

The sooner you clear up matters the "cheaper" in the long run it is likely to be.

HezzilFac
Posts:5
Joined:Mon May 24, 2021 5:32 pm

Re: Who is responsible for paying the tax

Postby HezzilFac » Mon May 31, 2021 7:50 am

This is an interesting situation, I hope you manage to clear this up Mihat.


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