Let Property Campaign advice

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    Let Property Campaign advice

    Hi All

    I am new to the forum and looking for some advice on the above.

    In 2009 my parents bought me a property to live in using an interest only mortgage (this however was against their residential home and not the one they bought for me). I lived in this property rent free for around a year, moving out due to being pregnant and the flat being too small. They tried to sell but got no interest at all and my mum began to rent it out. Upon speaking to her about this now she believed In her head the mortgage payments of £367 were essentially for the flat and the rent she received of £350 in her head equated to a loss and she did not declare this. The rent was paid solely into her account.

    In 2014 I was able to remortgage a new property I had bought to enable my mum to pay the interest only mortgage off, by this point she had to stop working due to health reasons and was in and out of hospital, it made sense for me to alleviate her financial stress. She continued to rent the property out to the same tenant.

    In 2019 my mums health deteriorated badly and she thought she wouldn't be around much longer and put the flat into my name legally. Again no change to the rent, that continued to go into her account.

    I understand this is a messy situation and I am asking for advice and hopefully no judgement, it's come to my attention recently whilst I have been taking care of her finances whilst she is in hospital she has never declared the rental income. Now I've brought this to her attention her health has taken another nosedive and she has not left her bed in days due to the stress of me bringing this up - doctors have been in to put her on a drip as she is so dehydrated. She is absolutely petrified of the repercussions

    I have been in touch with an accountant specialising in the Let Property Campaign but would like to hear if anyone within the forum has any helpful advice, as I understand that the flat was put into my name in 2019 am I liable for those years even though I wasn't collecting the rent?

    Also as the flat was purchased jointly by my parents would they need to file separately under the Let Property campaign?

    thanks in advance


    #2
    Yes, it's a bit of a mess, but not something that can't be fairly simply sorted out.

    First of all, for tax purposes what's important is the beneficial ownership of the property, not the names on the property deeds.
    So who the landlord is doesn't automatically follow who owns the property being rented - although they're usually the same.

    HMRC aren't likely to go back too far, their usual limit is seven years.

    When your mum started letting the property for money, she should have told HMRC and may have had to complete a tax return each year, but if the mortgage interest was £367 and the rent was £350, she wouldn't have owed any tax.
    Not telling HMRC and not completing the returns is technically a problem, but HMRC aren't likely to do too much about it as no tax was owed and it's too long ago.
    The same situation is probably true for your father - assuming he owned the property as well as your mother (HMRC would assume that he received 50% of the income, whether he was named as landlord or not).

    2014 to 2019 is a problem, because there was income but no mortgage interest.
    What tax is owed would depend on what your parents were earning at the same time.

    The transfer of the property to you wouldn't normally have changed anything, your mother continued as the landlord and received the rent, so you're not involved in the rental business at all.
    It's possible that HMRC will be suspicious of the set up, because it's not conventional, but families are usually quite flexible about internal arrangements, and I think it's quite likely that they will consider that your mother owes the tax and she has the income it relates to.

    Your mother should be reassured that this is something accountants deal with quite a lot and it can be sorted out quite reasonably and your mother will have time to pay the tax owed.
    Either your mum knew that she should have been paying tax and should have done something about it or it was a genuine mistake.
    Either way, this is exactly what the HMRC campaign is there for and I'm sure it will all get sorted quite sensibly.

    The only problem I can see is if no one has any money to pay the tax owed,
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Thanks for taking the time to reply - its much appreciated

      I have made initial contact with an accountant specialising in this field so hopefully I can get all info to her asap, my mum has always had landlord insurance on the property as well as a note of other expenses.

      If needed I can offer to pay the bill to avoid adding any more worry to her,

      thanks again for your reply

      Comment


        #4
        Don't forget about Capital Gains Tax when the property became yours (if it had increased in value).
        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

        Comment


          #5
          Just done a bit of research on that, wasn't aware of that. The property had decreased by around 24k when it was signed over to me going by the market in 2008 v 2014 would that be why I have not paid this?

          Comment


            #6
            Pleased to hear HMRC are continuing to track down likely tax avoiders/evaders.

            Zack, you are confusing CGT with Income tax

            There are over 10 taxes a landlord may pay. Buy a book on property tax. Getting & reading it will take less effort (time/money) than you will save.
            I am legally unqualified: If you need to rely on advice check it with a suitable authority - eg a solicitor specialising in landlord/tenant law...

            Comment


              #7
              Hi, thanks for your reply, could you elaborate on where I have confused capital gains tax and income tax please?

              We have hired an accountant to get what is owed paid, HMRC have not requested this of my parents. My parents are not disputing that tax is owed, they were not aware at the time.

              Comment


                #8
                1. I think the rental income of £350 per month comes to £4200 per year.

                In 2009, the Personal Allowance was around £6500 before starting to tax on the rental income.

                So unlikely for Tax Office to be interested in mum's non-declaration of rental income £4200 which is below the tax free personal allowance.

                You are NOT liable for tax on any rental income before 2019.

                2. When the property was transferred to your name in 2019, it is a disposal by your parents and they may have to pay tax on the capital gain. The capital gain is normally calculated from the "sale proceeds" minus "original costs".

                Each parent reports 50% of the capital gain and each person claims the capital gains personal allowance ( around £11,700)

                Comment


                  #9
                  Thanks so much for your informative reply Gordon it’s very helpful

                  thanks again all

                  Comment

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