Readers’ forum: Should rental income be taxed on company or individual?

A client Mrs A is UK resident and owns three UK residential rental properties which are mortgage-free.

Many years ago before we acted she formed A Ltd of which she is sole director/shareholder and the arrangement ever since is that the company lets the three properties to the tenants and receives the rent and pays corporation tax thereon.

HMRC is challenging this arrangement and is insisting that for property income to be taxed this way the beneficial interest must be evidenced in writing. HMRC is referring to PIM1020 and TSEM9912 and is asking for declarations of trust. The department is looking to assess Mrs A personally on the rental income ab initio.

We have put it to HMRC that questions of legal/beneficial ownership are not relevant it is simply a landlord/tenant/subtenant situation.

There is no written lease between Mrs A and A...