Can I employ my wife to manage my properties?

Gary and John are quite right, it's not illegal to overpay someone (I'm sure we all know people who are overpaid!) but it is if the purpose is to avoid paying tax. The remuneration has to be commensurate for the work done.

The idea of joint ownership is a better one but not really necessary (until you come to sell when it would be very beneficial). The question is who received the income. So have your income paid into either your wife's account or a joint one and then the income is attributed to either her or you both as suits you best. This is advice I got directly from a Tax Inspector.

Reply to the comment left by "Puzzler " at "15/12/2013 - 10:18":

Puzzler - Wouldn't receiving income from a property you didn't own be illegal if the purpose was to avoid paying tax?

3 years ago My wife and I decided to go down the same path although primarily because here employed work has ceased but I was paying 40% tax. - So we did set up a letting agency and made sure to look after 2 properties we don't own!. Now the properties that are solely in my name, pay her the letting agency fees! - Our accountant agreed this was acceptable - but only when we could show we had other peoples properties in the letting agency - o' he did put his fees up!
we do our own tenant finds £60 plus VAT for the advertising, we have a system that copes with LHA and monthly (and 2 weekly) payments . separate bank accounts of course. Its working well but I still pay 40% tax! so growing the pension payments now..
Allan Wadsworth.

Reply to the comment left by "Adrian Jones" at "15/12/2013 - 10:32":

Well actually I did it the other way round, I take the income received from property owned jointly. This is not for tax avoidance as I have a substantial cumulative loss in place anyway from the days when interest rates were high. That is a good question and one I did not ask at the time!

Reply to the comment left by "Puzzler " at "15/12/2013 - 10:18":

With respect to the Tax Inspector at the time, I don't feel this would work now, or would not stand up to scrutiny by HMRC. If I get paid a salary and pay it into my husband's bank account, that is still taxable upon me. Similarly a rental property owned by Mr X cannot merely pass on the rental income to a 3rd party and claim it is not income earned by Mr X. If this were the case all Landlords would be paying the income into their children's account's, or another relative who was not utilising their personal allowance!

Also, if you are changing the nature of joint ownership by claiming all the income yourself, for whatever reason, that is not technically correct and could be "corrected" in the future by HMRC....but only if they notice! I am only giving you my opinion, for what it's worth.

Reply to the comment left by "Yvette Newbury " at "15/12/2013 - 13:43":

Yvette, that is a very good point and I think you are probably right. In my case it makes absolutely no difference as regards to tax but for others it might.

Reply to the comment left by "Puzzler " at "15/12/2013 - 15:48":

If HMRC "correct" your own tax planning and apply the income to your wife for x number of years then it will affect your wife which presumably would affect you (assuming you are still together and you view your income etc as joint of course!)

Reply to the comment left by "Adrian Jones" at "15/12/2013 - 10:32":

No it wouldn't be illegal if the appropriate rules are followed, for example, trusts. Tax avoidance is not illegal (tax evasion is).

The following paragraph from the HMRC website explains it.

Where there is no partnership, the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.

However, where the joint owners are husband and wife, or civil partners, profits and losses are treated as arising to them in equal shares unless:

both entitlement to the income and the property are in unequal shares, and
both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

Reply to the comment left by "Puzzler " at "30/12/2013 - 07:48":

Hi Puzzler. Not sure I follows this. Oliver says he is the sole owner of the properties but the HMRC paragraph you have quoted refers to jointly owned property.

Happy New Year to everyone.

Reply to the comment left by "Adrian Jones" at "30/12/2013 - 10:34":

Yes Adrian, but go back over the whole thread - Yvette suggested transferring to joint names which generated various comments on how this would then be treated for tax.