17:04 PM, 17th September 2014, About 10 years ago 16
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?