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Rent a Room - Joint owners, only one living at property

20/05/2019 06:29:01
Hi, I am a joint owner with my parents of a flat.

I am the only one of the three of us living at the property.

Please can you tell me, if I let out a room, can I keep (obviously my parents would consent) and solely declare all of the rental income on my return of does it have to be split with my parents and declared by them also as they own 2/3 of the flat?

I guess, put simply, I’m asking, can the three of us decide who gets the rent income to keep/declare etc or does it legally have to be split by ownership shares (1/3 each)?

If I let it out, I would use the rent a room scheme as I am resident and declare the money (£7500) that way for simplicity.

If the income has legally to be split with my parents as co-owners, is my portion (£2500) eligible for rent a room relief only as they do not live at the property?

And in that case, what percentage can we claim relief for expenses (ground rents, council tax etc) on, only their 2/3 and not my 1/3 as I am resident.

I have tried to search online but there isn’t much info on joint ownership other than for married couples etc so any help much appreciated.

Thanks
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Rent a Room - Joint owners, only one living at property

21/05/2019 12:06:06
Anyone able to assist with this, or provide an email address for somebody who can help. Many thanks
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Re:Rent a Room - Joint owners, only one living at property

21/05/2019 14:12:45
Hi,

Thank you for your question.

I would advise you firstly that whoever has the beneficial ownership of a property (or part of the property) they are treated as having beneficial ownership of the income received.

Please refer to the guidance held within the HMRC Trusts,Settlements & Estates Manual at TSEM 9160 and TSEM 9170 for further information on this subject.

If you are the only person beneficially entitled to all of the rent a room income receipts in respect of the property that you reside in then then you will able to claim the full £7500 under the rent a room scheme.

However, if it is found that you and your parents are each entitled to a share of the income received then you will only be entitled to claim half of the £7500 (£3750).

Please refer to the guidance held within the Property Income Manual at PIM 4010.

Please note that due to the fact that the property is not your parents only or main residence then if it is found that they are entitled to a share of the income they cannot use the rent a room scheme and would not be entitled to any of the £7500 rent a room limit.

Your parents would be responsible for declaring their share of the income individually to HMRC under the normal income from property rules.

In respect of any expenses incurred then if the income was to be shared then any expenses incurred would be split as per the beneficial ownership of the property.

Please ensure you refer to the HMRC helpsheet HS223 which explains the two methods of working out your tax that would be due under the rent a room scheme.(You would not be able to deduct any expenses if using Method B).
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Rent a Room - Joint owners, only one living at property

23/05/2019 06:20:13
Thanks very much for all of the info

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