Paying my unemployed mother to manage two properties

by Readers Question

10:55 AM, 9th September 2016
About 2 years ago

Paying my unemployed mother to manage two properties

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Paying my unemployed mother to manage two properties

I am planning to ask my mother to manage 2 properties for me which would include inspections, agreements, certificates repairs, gardening, cleaning etc at £800 a month. I would like to set-up my mother as a sole trader paying NIC 2 taxes.expenses

The tenants will pay rent directly into my personal account which I would then set a direct debit to my mother each month for the management and maintenance fees. I do not believe the money should go into my mothers account first before she transfer this to me or would this be necessary?

She will bill me for the buildings insurance and safety certifcates only.

Would this be legal in terms of tax implications.

Many thanks

LandLord2



Comments

Neil Patterson

10:58 AM, 9th September 2016
About 2 years ago

You are going to need a qualified accountant for the fine detail on this so you do not end up being investigated by HMRC.

As an example HMRC will only allow reasonable expenses for letting agents fees eg I think up to about 15%. You can't be seen to be trying to hide profit which is the potential risk here.

Paul Green

12:32 PM, 9th September 2016
About 2 years ago

Pay a management company (regardless of who owns the company) £800 per month on two properties, that's extortionate. HMRC will know you are transfering profit to a family member in order to reduce your tax bill... I would call that tax evasion....you should be stripped of your knighthood. Lol. Plus your accountant would see straight through your scheme, he has a duty of care not to submit fradulant tax returns. Nice try!

Martin Rdg

13:51 PM, 9th September 2016
About 2 years ago

Sorry, I do not agree with the previous comments - mainly because you do not say what the rent is - if the rent is £4k a month per property then what you propose is not unreasonable. Typically a letting agent would charge 10% plus VAT for managing a property and cleaning and gardening would be extra so bear that in mind when calculating what to pay your mum.

Paul Green

14:20 PM, 9th September 2016
About 2 years ago

Your right on 4K it's not disproportionate....

Maybe he owns 2 castles....

Gary Nock

15:18 PM, 9th September 2016
About 2 years ago

Neil is right. Most agents charge between 8% and 15% plus VAT to manage a property. Landlord2s mom could set up as a sole trader as a property manager. Strictly speaking she would need to be registered under one of the Property Redress Schemes as an agent. But be careful she has no interest in the properties as she cannot then pay herself to manage them.

It's certainly "dooable" but not at £800 a month.

Yvonne Francis

13:02 PM, 10th September 2016
About 2 years ago

Must say the management fee of £800 a month would need a rental of almost £100,000 to justify. I appreciate other services like gardening and extras, but still I can't image this figure would justify that, unless you have very high yielding properties. Also as Gary points out she may need registering because she is doing it for payment.

Just wanted to say that some years ago I was inspected for tax on a random bases.
I submitted invoices from my son who at that time lived with me. My son from his school years and thought his student years decorated and did general maintenance on my properties during August for the change over of tenancies. It was questioned by the Inland Revenue, but when I pointed out it was genuine (and it was) they accepted it. I pointed to the fact no other person did maintenance and I bought paint etc. which he used and anyway I couldn't manage with out him (all very true).

Would it not be better to let your mother bill you for separate tasks at reasonable rates. Since my son entered full time employment, eight years ago, I have employed my niece and her husband. I've never thought it a problem. They invoice me for separate jobs at reasonable rates. I'm lucky they are professional builders but sole traders.


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