Salaries and wages that a landlord pays to employees engaged
full time or part time on managing the land or property within
their rental business are allowable. This includes any normal
pension contributions they may pay for their employees. But unusual
or lump sum pension contributions may not be allowable.
A deduction can’t be claimed for salaries and wages
that were not paid during the tax year unless they were paid within
nine months after the end of it. This is a special rule that only
applies to pay. The relief isn’t lost if the wages etc are
paid late; in that case the deduction is given in the tax year when
the payment is actually made, (FA89/S43 or ITTOIA05/S272).
Sometimes an employee is engaged partly to manage the rental
business property and partly on private work or other work outside
the rental business. Here a fair and reasonable split has to be
made which takes into account all the facts; only the part of the
wage or salary properly attributable to the rental business duties
is allowable as a deduction in computing the rental business profit
or loss.
A landlord can’t deduct anything for the time they
spend themselves working in their own rental business. They can
deduct any wages or salaries they pay to their spouse, civil
partner or other relations for working in the rental business
provided the amounts paid represent a proper commercial reward for
the work done. The spouse, civil partner or relative will be
taxable on their earnings if their income is large enough.
The landlord will need to operate the PAYE and NIC systems
on payments to employees.
