An individual is renting out a property, but she is not receiving the rent. The rent is paid to her son directly. He is also responsible for the payment of the levy. Should the rental income be added to the individual’s taxable income as the property is on her name?
Important:
This answer is based on tax law year ending 28 February 2021.
Answer:
From the information provided the property is not jointly owned. But, if the property is jointly owned, this will, in our view, also constitute a trade carried on jointly. Section 24H will then apply and the receipts and expenses will be apportioned in the ratio agreed upon by the parties. When two people own property together in undivided shares, it is advisable to enter into an agreement which will regulate their rights and obligations and which states the terms and conditions of their ownership. The extent of the shares held by the co-owners do not have to be equal. If not jointly owned, the rental accrues to the owner of the property and it doesn’t matter that she doesn’t actually receive it – it is her income. This may well be a donation of the rental income (potential donations tax liability).