Property Ownership

[JP2005]

My 04/05 personal tax return is being investigated and i have a meeting next week with an inspector.

I have a portfolio of rental and holidaylet properties with my business partner/partner and all have been declared on our tax returns as jointly owned i.e rental profits / losses have always been split 50-50.

Due to one reason or another at the time of purchase some of the properties (and thus mortgage agreements) arent technically jointly owned and some are in just one name.

No deed of trust has ever been made so am i correct in thinking i (and my partners) will have no come-back if the taxman wants to reallocate all the rental income according to who technically owns the property??

[CDavey9501@aol.com]

Probably. Although it is probably a little unfair that HMRC will use settlement legislation and re-allocate income when it suits their purposes.

[maths]

It all depends upon the facts and evidence to support them.

How were the properties purchased? Can you prove you each contributed cash as to fund your respective shares?

Assuming you can, and given the 50/50 declarations re income on your respective Tax Returns you have a case to argue that HMRC cannot allocate 100% to you.

Lack of trust documentation is obviously very unhelpful. This does not per se preclude you arguing that you have held 50% of the properties as a bare trustee for your partner.

If numbers warrant then specific advice needed.

Attending meetings with HMRC without advisor bad news indeed.

[wamstax]

There is one line of thinking that you might employ to counteract any challenge byHMRC -namely profits can only arise to the person entitled to the income. Ok it takes a bit of working but what is to stop somebody who has at least a part interest in a property letting somebody else fully operate the leasing and be entitled to ALL the profits.

As Maths says bare trusts is an argument but with the new attack by HMRC on new bare trusts from 6-04-2007 you could be storing up a problem for the future and you should really find a suitable and qualified professional to help
regards
bill@wamstaxltd.com
http://www.wamstaxltd.com