[Misc] Legal help

[essbee1]

Hi NSC,

I had a legal question which I would really appreciate some help on.

Does a letting agreement on a property agreed with an estate agent
have the same legally binding power as a tenancy agreement as far as tax payable is
concerned? Or is it only the tenancy agreement with tenants and the landlord
named on the "tenancy agreement" that has implications
for having to complete tax returns for the property owner and which HMRC
need to informed about/will chase the landlord on etc? Can they be
different?

It's a thing I'm having to sort out at the moment. Weird I know, but I'm in this
position for some reason all the same. It's a mess as you can imagine.

Ta very much

 

[Herr Tubthumper]

I’m not sure I fully understand the scenario but as a starting point you pay tax on any profit from the rental. The profit is the rental income you receive less permitted expenses which can include fees paid to agents. If you explain the situation more clearly and with detail I’m sure NSC can help.

I also think this is more likely an accountancy question as opposed to legal.

 

[rippleman]

I really can't get my head around the question. Are you the landlord, the tenant or the agent? I assume the landlord if you are worrying about taxes.

It is the landlord's responsibility to report the profits from letting property that they own. It has nothing to do with the letting agent (unless the property owner is resident outside the UK).

The landlord must register for Self Assessment and complete Tax Returns each year.

 

[beorhthelm]

for purpose of tax, HMRC will be interested in numbers. whatever document says you'll be paid x, or pay y for deductions. if not getting an accountant, i'm sure there are videos and articles on t'internet explaining the details necessary for self assessment.

 

[Zeberdi]

The OP seems to be asking asking ( if I understand this correctly) if he can avoid tax on income from a rental property if he uses an estate agent to manage the letting of his property- ie making him a unnamed third party rather the main party to a contract between the Agent and the Tenant.

You still have a contract between yourself and the Agent to contract with the Tenant on your behalf therefore you are legally bound by the contract as a third party ( or at least by the two separate contracts) - they are both legally enforceable but that is beside the point - third party or not - as far as tax liability is concerned you are still the landlord regardless of whether your contract is directly between you and the tenants or between the Agents and the Tenants or if you have no contract - The Agent is not receiving money for themselves they are receiving it on your behalf as your Agent! You still have to pay tax on the profit you make on your property if you are the Landlord (after deductibles)

You can’t avoid paying tax on your rental income if the property is in your name but you can reduce the amount by claiming expenses ( ie letting agent fees etc)

 

[rippleman]

The OP seems to be asking asking ( if I understand this correctly) if he can avoid tax on income from a rental property if he uses an estate agent to manage the letting of his property- ie making him a unnamed third party rather the main party to a contract between the Agent and the Tenant.

You still have a contract between yourself and the Agent to contract with the Tenant on your behalf therefore you are legally bound by the contract as a third party ( or at least by the two separate contracts) - they are both legally enforceable but that is beside the point - but third party or not, you are still the landlord whether your contract is directly between you and the tenants or between the Agents and the Tenants- The Agent is not receiving money for themselves they are receiving as your Agent! You still have to pay tax on the profit you make on your property (after deductibles)

You can’t avoid paying tax on your rental income if the property is in your name but you can reduce the amount by claiming expenses ( ie letting agent fees etc)

Sounds right to me.

It didn't click with me that the OP was looking for advice on tax evasion!

 

[warmleyseagull]

Follow the cash is the answer. What landlord receives net of allowable expenses is what he or she is taxed on; estate agent is relevant only insofar as their fees are deductible. Nature (or even existence) of TA is irrelevant.

 

[essbee1]

Thanks for all the responses and sorry for being vague. Firstly, I will not benefit from any income from the rental.
But I am being asked to sign the agreement with the letting agent NOT the tenancy agreement. It's because I
have two f******g useless family members. I am happy to sign the letting agreement, but not if that means that HMRC
will come chasing after me. Is it the tenancy agreement person they come after? My ***** useless family members
can sign the tenancy agreement - since I want nothing to do with it.

 

[warmleyseagull]

Let f******g useless family members sort it themselves?

 

[essbee1]

Let f******g useless family members sort it themselves?

Fair point.

 

[Eric the meek]

Presumably you don't trust the f*****g useless family members to do it properly, otherwise you would get them to sort it themselves?

 

[scooter1]

Let f******g useless family members sort it themselves?

Definitely this.
Steer well clear of getting involved in anything that might involve HMRC further down the line, if in fact it really has nothing to do with you now

 

[rippleman]

Thanks for all the responses and sorry for being vague. Firstly, I will not benefit from any income from the rental.
But I am being asked to sign the agreement with the letting agent NOT the tenancy agreement. It's because I
have two f******g useless family members. I am happy to sign the letting agreement, but not if that means that HMRC
will come chasing after me. Is it the tenancy agreement person they come after? My ***** useless family members
can sign the tenancy agreement - since I want nothing to do with it.

In this scenario, HMRC can't come after you. You are not the "landlord" named in the Tenancy Agreement. Your f***ing useless family members are the beneficial owners of the rent and the reporting of the taxable profits and payments of the tax are their responsibility.

Why are they refusing to sign the agreement with the letting agent? Whatever the reason, that should be enough for you act as suggested by others and steer well clear.

 

[essbee1]

Thank you all. Rippleman - thank you. I'm sh&t at explaining stuff like this.

Families are a nightmare - and I could write a book on the politics behind my
silly situation. But there it is.

Thankfully and not for the first time, NSC and the Albion have stopped me going mad.
Ta very much.

 

[Herr Tubthumper]

If you sign the agreement with the letting agent I don’t think your f***ing useless family members will be able to deduct the management fees from the rent? Could be costly

 

[BevBHA]

NSC somehow answered your question without having the slightest clue what the question actually was

 

[essbee1]

If you sign the agreement with the letting agent I don’t think your f***ing useless family members will be able to deduct the management fees from the rent? Could be costly

I'm not sure I understand Herr. Can you elaborate please?

 

[B-right-on]

The person(s) who need to pay the taxes are those that receive the rental money as that is counted as personal income and is taxable.

However there may be other legal implications regarding signing the agreement, like what are the ramifications for tenants not paying rent, what about building insurance and there's a whole host of things a landlord has duty of care to ensure is up to standard. Like if, god forbid, the boiler chucks carbon monoxide into the property and someone dies (worst case), are you now liable because you are on the agreement? Yet not getting any of the benefits (income).

It's all very odd tbh.

 

[Cotton Socks]

Surely the landlord should be asking the agent to act on their behalf? You're becoming the 'middle' person in between the landlord and agent. Any agreement that you sign with the agent will leave you liable. If agents fee's aren't paid for whatever reason, you'll be the one that has to pay them as you signed the agreement.

 

[Shropshire Seagull]

Legal agreements are contracts and can be made between any person(s) or organisation(s). They are formal commitments for one party to supply goods or perform service(s) in return for [usually] payment.

The contract with the letting agent will be along the lines of they will do a) b) c) in return for £££ - usually a percentage of the rental payment income. Often they will collect the rent, deduct their fee and forward on the balance [to the landlord].

The tenancy agreement will be between the tenant & the landlord - tenant agrees to do x) y) z) and pay £££ and the landlord will do 1) 2) 3)

To help understand your situation, please advise who the landlord is. This is usually the name of the person(s) who hold the title deeds to the property. I can't think of a situation where someone who is not the landlord would enter into a letting agency contract [not saying it's impossible] without also being on the tenancy agreement as the landlord.

As others have said, the HMRC tax aspect is about paying tax on rental income [profit] after permitted expense deductions.

Does the property being rented have a mortgage on it? If yes, HMRC will know about it and will expect a Self Assessment to be completed.
Was the property gifted, maybe as a legacy? If yes, HMRC will know about it - ditto SA required.
HMRC systems have long tentacles [I worked on many over a 10 year period]. e.g. they can access HM Land Registry systems for names of deed holders so if you think you can hide from them, they will catch up with you eventually once your debt becomes of significant yield to cost-justify an investigation, and they can go back 7 years.

I think the key to all of this is who's name(s) are on the title deeds to the rented property? This will identify who is the landlord and should therefore be signing contracts and dealing with rent/repairs/agents & taxes.

If it's a pain in the arse and no one willing to put the effort in, sell the property and / or walk away.