Hi, i am hoping someone can help me on the following topic.
I have a potential client who had been renting a property for 10 years but has not been declaring the earnings. The client recently bought another property and also looking to put it on rent but now he has decided to show all his earnings. He falls on the 40% tax band as an employee, so all the income from the rental would be deducted at 40%.
He has asked me if it is possible for:
1) the rental earnings to be located to his wife who doesnt use her full annual personal allowance at present?
2) if/or should he set up a real estate business under his wife's name so all rental income would be directed through the real estate business?
i would really appreciate some help and advise on this as i would really like the business from this client.
I am lead to believe that if you have a mortgage on the said properties then whoevers name is on the mortgage/deeds, that whos has to do the self assessment. For example if say hubby and wife own the property jointly 50/50 that is rented out and the hubby is a 40% tax payer and the wife is only a 20% tax payer, you can't suddenly let all the income go to the wife to avoid paying the 40% tax on the income recieved. Its when you purchase the property, its the persons name on it that will be liable for the tax if it is rented out etc. Not sure if I have explained that very well!
Regarding setting up a company in your wifes name, I think that is a possibility but to be honest I don't know enough about it to advise on it. HOpefully someone else will be on here shortly who has more knowledge of the rental markets.
Would be good for your client to spend half an hour with an accountant to advise him the best route forward. I guess he must make some good money as hes got a few properties, hes probably not wanting to loose 40% to the tax man!
Thank you Amanda- yes i did already advise him that as the mortgage or property deeds are solely under his name the rental income cant be transfered to her. See he will pay me depended on how far i can go with the tax returns and as im currently studying towards my ACCA this will be valueable experience not forgeting being able to pay for my papers with less strains. And you're right he doesnt want to be paying anymore to the tax man.
Thank you EagleEducation- I currently submit tax returns for my husband for his rental property so have followed the HMRC tax allowances and allowable deductions. Just stuck on this part where this client wants to use his wife's personal allowance as a way of paying less tax to the tax man.........
as im currently studying towards my ACCA this will be valueable experience
This has come up on the site a lot.
It sounds as though you are doing this for your own clients rather than an employers.
Don't forget the restrictions of ACCA regulation 8 that state that regardless of any other body that one might be a member of or whether one mentions any affiliation to the ACCA, as a student one can only undertake bookkeeping to trial balance, VAT and payroll work on a freelance basis.
We can't file returns, or prepare accounts, or give advice including tax advice unless we are directly supervised by a suitably qualified accountant.
There does seem to be some flexibility related to the filing of self assessment returns but not any advice given in related to such returns. You might also want to confirm the self assessment situation directly with the ACCA as although someone on the site was advised that they could such does seem in direct contradiction of the wording of regulation 8.
Sorry, I hate the unfairness of regulation 8 with a vengeance but felt that I needed to bring your attention to it as I wouldn't want to see any ACCA student lose their hard earned qualification because of inadvertently overstepping the work that they were allowed to perform as a student.
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun, thank you for bringing that to light, when i had spoken to the HMRC self-assessment team for my husband's returns they said i did not have to be qualified, but i defiantly will look into the ACCA regulation 8.
Yes Neil i agree there is an ethical issue too. Regulation 8 - Shaun does that apply to all students even if they have alternative qualifications? Interesting!
even if students are qualified with another body the ACCA does not allow them to offer anything beyond bookkeeping to trial balance, VAT and Payroll services.
This causes a bit of an issue in that if someone is ICB level 4 or MAAT and working for themselves producing final accounts for small businesses and then moves on to study with the ACCA. Suddenly they are not deemed competent enough to produce returns unsupervised even though they are not actually telling anyone that they have any association with the ACCA!
That's the same rule no matter whether someone has passed one exam or all of the exams and are sitting as an affiliate unable to get their two years post qualification experience but with all of the knowledge gained form years of study.
Its a very cruel qualification that perpetuates low paid trainee positions as people will pretty much accept any money in order to gain those two years post qualification in order to gain a practicing certificate.
That said, to my mind it is also the best qualification despite the issues over regulation 8.
I do feel that an awful lot of people who train as a chartered certified actually end up benefiting the membership of other bodies such as IFA and AIA that have a more realistic view on who can practice.... Which does make ffor some very well trained accountants with other supervisory bodies.
The idea that someone with five to ten years study at ACCA level possibly post AAT is not able to offer the same services as someone that has reached MICB in a year is just beyond a joke.
For more discussion on this issue see these threads :
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
I thought that myself but figured that the ACCA consideration of not actually being able to do the work trumped it for a response.
This case needs an accountant involved to negotiate a settlement with the revenue for the client coming in from the cold before taking the case forwards.
If I were the client I would be wondering about where the money for the missed tax, interest, penalties and surcharges was going to be coming from rather than thinking about buying another property! (This may yet cost them the one that they have!!!).
Another issue here is that if the property was not bought on a buy to let which seems to be the case as the mortgage company has apparently not asked for the self assessment returns for the past ten years then does the mortgage actually permit the house to be rented out? I doubt if the mortgage company would rescind the mortgage on the property but they might change and backdate the interest rate to reflect a commercial loan.
All in all, unless I was looking for a hobby project I would not touch this client with a ten foot barge pole.
The ACCA clause is hence a good get out of jail free card for Hani to use here.
all the best,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun Thank you so much for all the threads and your advise....sounds like it is one that i should stay clear of at the moment as i dont want to take the risk of loosing my acca qualification.
Breaking News........... "Regulation 8 comes in handy"
Eventually it had to happen.
Bit like the yellow pages is really useful as a paperweight... Little use for anything else but as a paperweight accept no substitute.
worth noting that once out of it's plastic wrapper it loses some of it's solidity so short of glueing all of the pages together best to leave them bound in their wrappers for optimal usage.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Hi Shaun Was wondering if you could help me out on this next topic. How do i/can i forcast a VAT return? so for example...if the average weekly turnover is of £2500, what would the the VAT charge be? Any help?
Depends on the mix of VATable and Non VATable supplies but if all supplies are at 20% and £2500 is the VAT inclusive figure then to work back to seperating the VAT and Turnover figures then simply multiply by 1 and divide by 6 to give the VAT figure then deduct that from turnover to give you the actual sales figure.
So, £2500 would be £2000 sales and £500 VAT. (Hope that was actually the question that you were asking).
A forecast from that would just be £500 * 13 (£6500) less any VAT on legitimate expenditure.
Forecasting is not really something I do with VAT though as the exact figures are available to complete the return.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
