A person may own a property that is let out as part of a partnership business. It can happen if the individual is a trading partner or a professional partner who also lets out some of his land and buildings.
A less common scenario is, the individual is in a relationship that runs an investment company that is not a trade. But that involves or consists of the property being out.
When is There a Property Partnership?
The letting of a jointly-owned property in itself does not give rise to a partnership. Indeed a partnership is unlikely to exist where joint owners let a property that they own together. Whether there is a partnership depends on the degree of business activity involved.
Separate Rental Business
A rental partnership business is regarded as a separate affair from any other rental company carried out by the partner. If a person owns property in their sole name and is also a partner in a partnership that lets out a property. In a scenario like this, the partnership rental income is not taken into account in computing the profits of the individual’s rental business – it’s a deal.
If an individual is a partner in more than one partnership that lets out a land, everyone views it separate rental company. The income of one can not balance against the losses of another.
Example
Kate has a flat that she lets out. She is also a partner in a graphic design agency, which works from a converted barn. The partnership lets out a separate barn to another business.
Kate has two property rental businesses. One business comprises the flat that she owns in her sole name and lets out. The partnership rental business consists of the barn that is let out as a separate rental business. This is a long-term arrangement.
Kate must keep her share of the profits or losses from the partnership property business separate from the personal rental business. She cannot set the profits from one against losses from the other. They must return separately on her tax return.
Managing a property partnership comes with real tax complexity — from keeping rental income streams separate to filing correctly on each partner’s self-assessment return. Getting this wrong can trigger HMRC penalties or result in paying more tax than you should. At Accotax, our specialist Accountants for Property Business work with landlords, property investors, and partnership arrangements across the UK. Whether you need help structuring your property partnership from the start, staying compliant with HMRC, or planning to reduce your overall tax liability, our team is ready to help. Book a free consultation today and speak directly with a property accounting specialist.
