Form 17 equivalent, Sole owned property, trust deed?

[King_Maker]

"Do you not agree that the Legal Estate can only be held in equal undivided shares? If so, unequal shares must be as tenants in common? In TSEM9814, HMRC state that s 836 also applies to unequal shares - which cannot be the joint Legal Estate?"

My first question is rhetorical in that I know the answer is Yes.

Surely the answer to the second question is also Yes?

Likewise it must be Yes to question 3.

I am not saying I am correct, merely that HMRC agree with me. The requirement to disapply section 836 applies to UNEQUAL SHARES also, and only Form 17 can do this - TSEM 9814.

What part of the above is incorrect?

[section 44]

Do you not agree that the Legal Estate can only be held in equal undivided shares?

(I think) all three of us are agreed on this.

From TESM9814:

"This rule applies even if the individuals own the property in unequal shares."

Interesting use of the word "own" (could that extend to equity?), whatever that may mean.

[maths]

"Do you not agree that the Legal Estate can only be held in equal undivided shares? If so, unequal shares must be as tenants in common? In TSEM9814, HMRC state that s 836 also applies to unequal shares - which cannot be the joint Legal Estate?"

My first question is rhetorical in that I know the answer is Yes.

Agreed.

Surely the answer to the second question is also Yes?

It is not possible to hold the legal estate unequally; it cannot be held as tenants in common.

Likewise it must be Yes to question 3.

When HMRC say s 836 applies to shares held unequally they mean that under s 836 where legal title is held in the name of both spouses but they have declared they hold their beneficial interests unequally (which must mean as tenants in common) the income split is nevertheless for income tax purposes still split 50/50 ie not in line with their actual beneficial interests. For income tax to apply other than 50/50 then requires the election under s 837 (ie Form 17).

I am not saying I am correct, merely that HMRC agree with me. The requirement to disapply section 836 applies to UNEQUAL SHARES also, and only Form 17 can do this - TSEM 9814.

However, if legal title is held in one spouse name only then s 836 not in point; Form 17 then not in point. A simple declaration of trust then enables income tax to be levied as per the split contained in the declaration (and no Form 17 necessary).

[section 44]

if that is correct then it begs the question, what's the purpose of the form 17 procedure if it can be circumvented so easily?

[maths]

if that is correct then it begs the question, what's the purpose of the form 17 procedure if it can be circumvented so easily?

There is no circumvention. S 836 was designed to simplify income tax for spouses who own property in their joint names ie we (HMRC) will assume you spouses want to split the income 50/50 (ie equally). However, you may not want this in which case we (HMRC) have provided that you can file a Form 17 to reflect what you want.

If only one spouse purchased the property in their name only then they are taxed 100% on the income; unless, they can show HMRC that they are not in fact entitled to 100% as evidenced by production of a declaration of trust.

There is no circumvention as such; just two different administrative approaches.

[section 44]

S 836 was designed to simplify income tax

Is there any authority for this (i.e. that is, as opposed to it being a revenue protection provision)?

[maths]

Would need to go back to original introduction and explanation at the time; I'm basing my comment in this regard on my memory.

[maths]

Karen F

As you can see, what you are trying to understand is something that tax professionals do not necessarily all agree on simple thought it may all seem.

[KarenF]

Indeed, Sir. Me feel dizzy...

[maths]

Me too!
I'm intrigued as to the timing of your postings. Are you outside the UK?