HMRC can’t decide if I should register as a Self Employed landlord!

HMRC can’t decide if I should register as a Self Employed landlord!

17:04 PM, 17th September 2014, About 7 years ago 16

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HMRC can't decide if I should register as a Self Employed landlord!

I manage the residential letting of 7 properties which I jointly own with my wife and/or brother and/or sister and HMRC can’t decide if I should register as a Self Employed landlord.

Currently, I am not registered as Self Employed and normally complete the Property section of my Self Assessment tax return.

However, as tax year, I will be receiving a management fee (albeit below the £5,885/year exemption threshold) I telephoned HMRC Self Employment Services to find out:

1) Whether I needed to register as Self Employed
2) How the fee should be included on my tax return

I was told that I should be registered as Self Employed in any case because I own 3 OR MORE RENTAL PROPERTIES. I said that I had never heard of this rule and understood that a Residential Landlord was deemed to be not Self Employed. The response I received was that “the rules are changing all the time”.

With regard to the management fee, I was told that this should be ADDED TO THE RENTAL INCOME and the total included as income from the business. Therefore, as this would exceed the exemption threshold, I would be liable to pay Class 2 National Insurance at £2.75 per week.

I was told that I would be sent a Self Employment form to complete regarding the rental business and this would then be assessed by specialists. I said it sounded as though the form pre-supposed that I was Self Employed, when I thought I wasn’t!

Finally, I said that my wife was currently joint owner of 2 of the rental properties BUT WAS NOT INVOLVED IN MANAGING THEM. However, I wondered if she would also need to register as Self Employed should she own or joint-own another? I was told that she WOULD need to complete the Self Employment form once she owned 3 rental properties even though she did not manage them.

Not being confident with the information I had been given, I decided to phone the HMRC Self Assessment helpline.

The person I spoke to said that she had never heard of a landlord owning 3 properties or more needing to register as Self Employed, however, just in case joint ownership affects things, she will check with the Technical Team and get back to me. I am still waiting.

As for rental property management fees, assuming that there is no requirement for me to register as Self Employed, the total should be included on my Self Assessment tax return as part of ‘Property Income’.

What do other landlords do?

Has anyone else been told they should register as Self Employed?

Is there a definitive answer?




by Mark Alexander

17:08 PM, 17th September 2014, About 7 years ago

My understanding is that rental income from properties you own is investment income, therefore no requirement to register as self employed.

However, if you are charging management fees to other property owners then logic would suggest that's earned income and therefore, you must be self employed and registered accordingly.

by Mike W

18:15 PM, 17th September 2014, About 7 years ago

I continue to be amazed at the increasing levels of incompetence of 'experts'. Its like walking into a newsagents to buy a newspaper, asking to buy 'The Times' (clearly visible on the shelf) and the shop assistant saying 'I don't know if we sell that one.

I particularly notice the increase in 'telephone responses'. It is as if the responder is taking advantage of his/her anonymity.

I now record my telephone calls as a matter of routine.

I'm with Mark on this. The revenue won't go down this route. If they did we would be running a business with all the associated benefits.

by Yvette Newbury

21:47 PM, 17th September 2014, About 7 years ago

Thank you MIke W - absolutely agree with you on your opinion of experts in all walks of our life! I do agree with Mark Alexanders' interpretation of the situation here. By the way, whilst HMRC do not seem to view us as self-employed, every other organisation does eg. banks, financing arrangements as landlords do not fit into any other pigeon hole.

by Mark Alexander

22:01 PM, 17th September 2014, About 7 years ago

Reply to the comment left by "Yvette Newbury " at "17/09/2014 - 21:47":

Trouble is, HMRC don't really see us as investors either! If they did we would get CGT roll-over relief. Basically we are a hybrid, but not like a hybrid car that attracts less tax, we pay a lot more (directly an indirectly in many forms) despite being part of the solution for one of the nations biggest problems HOUSING.

by Yvette Newbury

22:11 PM, 17th September 2014, About 7 years ago

CGT roll-over relief, my husband and I were just talking about that. All these articles I have read about a lack of properties being placed for sale I know a number of landlords who will not place them for sale due to CGT and are happy just to keep hold of them forever. If taper relief were re-introduced it would really free up the market! I wish someone would listen and not give the "landlords get too may reliefs" line over and over again.

by Mark Alexander

22:57 PM, 17th September 2014, About 7 years ago

Reply to the comment left by "Yvette Newbury " at "17/09/2014 - 22:11":

Yes I totally agree. Many landlords geared themselves up highly before the credit crunch and are now trapped into ownership, not by negative equity but the CGT that would fall due on disposals is more than the net equity in their properties.

by michelle mor

10:04 AM, 25th September 2014, About 7 years ago

I have had this problem, I phoned up the relevant people and asked as I am painting and decorating and doing my own letting management how do I stand with tax and all that and was told well if you want to paint put new boiler in that's up to you does not come under management of the property comes as normal looking after it. so if I pay someone to do it that's ok but can not say I am managing the place myself.
then I was phoned back 5mins later which went onto my voice mail and told by the same person she made a mistake, but about what I don't know, then I re phoned and got a load of different advise, so have no idea where I stand.

by Ian Cognito

12:26 PM, 25th September 2014, About 7 years ago

Reply to the comment left by "michelle mor" at "25/09/2014 - 10:04":

Ridiculous, isn't it. Maybe I'll write the same letter to both HMRC Self Assessment Services and HMRC Self Employment Services and compare their written responses.

by michelle mor

21:01 PM, 25th September 2014, About 7 years ago

Reply to the comment left by "Ian Cognito" at "25/09/2014 - 12:26":

you will probably wait a long time for a reply, because if you phone they have to say something but answer you back by post dream on, i think i will go into an office tell them that it is being recorded for training purposes and see what they have to say.

by Ian Cognito

14:55 PM, 2nd December 2014, About 7 years ago

Reply to the comment left by "michelle mor" at "25/09/2014 - 21:01":

I hope this thread is still live as I have received an unambiguous response by letter from HMRC PAYE & Self Assessment:

"With regard to your enquiry about management fee income, there is no need to register as Self Employed. You should enter the amount of income received in box 16 page T3, and advise that it is a management fee for Income From Property in box 20 on the same page."

Interestingly, I have received no reply from HMRC NI Contributions Office who, you may remember, were the department that originally informed me that I should register as Self Employed (due to owning 3 or more rental properties) and pay Class 2 NI Contributions (due to the total of management fee and rental income exceeding the exemption threshold).

I'll leave others to comment, if they wish.......

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