Buy To Let Rental Income Catch

Income shifting

According to PKF, couples who let out property for rental income could fall foul of new ‘income-shifting’ tax legislation aimed at family businesses even if they are not set up as a company.  

An individual who transfers ownership of half of a property and the rent generated to a spouse or partner will be subject to the income-shifting provisions.  For tax purposes, all the rent will be taxed on the first individual, the marital status of the couple is immaterial.  

Neither the draft legislation or the draft guidance from HM Revenue and Customs (HMRC) state that buy-to-let partnerships are excluded from the new rules.  

Our view

This is a slightly harsh view.  We suggest HMRC will only employ the ‘income shift’ rules, similar to those used in limited company businesses, if there is significant abuse.  Mr and Mrs Average need not worry.

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