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Where Taxpayers and Advisers Meet

Husband/Wife - Reducing income tax due on rent

metalfish
Posts:4
Joined:Wed Sep 28, 2011 2:24 pm
Re: Husband/Wife - Reducing income tax due on rent

Postby metalfish » Thu Sep 29, 2011 12:07 pm

I'm confused again now... :)

Maths, are you saying that the Declaration of Trust is a red-herring and rental income can only be apportioned in the same way as actual ownership specified in the Tenants in Common split?

This seems different to what others have been saying about setting up a Declaration of Trust, including Incredulum and Peter D, so again I feel as though there is conflicting advice here.

Is there any way to determine the definitive guide, (if indeed it is possible to do this)?

Thanks again.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby maths » Thu Sep 29, 2011 1:42 pm

Maths, are you saying that the Declaration of Trust is a red-herring and rental income can only be apportioned in the same way as actual ownership specified in the Tenants in Common split?
Absolutely (where joint legal title) for married couples (non-marrieds subject to different rules).

This is quite clear from ITA 2007 s 837 and Form 17.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby section 44 » Thu Sep 29, 2011 2:02 pm

In this context, tenants in common and a declaration of trust are effectively the same thing.

Legally property can only be co-owned as joint tenants. That is, each legal owner owns the whole.

In equity property can be co-owned as joint tenants or tenants in common. The latter being that each person owns a proportion of the whole.

By holding property (in equity/beneficial ownership) as tenants in common then this means that the joint tenancy must have been severed. A declaration of trust would have the same effect or, where the joint tenancy has already been severed, could change each person's entitlement.

If the property is currently legally and beneficially owned as joint tenants then you could either:

1. sever the joint tenancy and own it as tenants in common beneficially 1:99;

2. declare a trust so that you both hold the property on trust for each of you beneficially 1:99; or

3. a two-step combination of the above,

the end result is the same.

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby Incredulum » Thu Sep 29, 2011 2:16 pm

Maths, are you saying that the Declaration of Trust is a red-herring and rental income can only be apportioned in the same way as actual ownership specified in the Tenants in Common split?

This seems different to what others have been saying about setting up a Declaration of Trust,
I don't think so. (It doesn't help that four people are telling you the same thing, differently.)

You started out with the position of a legal ownership split of owning the property 50:50 tenants in common and asking for a solution in order that W gets the lion's share of the income.
Is it possible for myself and my wife to be tenants in common owning 50% each of the property, but for any rental income to be split 99%:1% with the majority to going to my wife?
The solution to this question is a declaration of trust. There are plenty of other solutions to different questions which all give the same result.

metalfish
Posts:4
Joined:Wed Sep 28, 2011 2:24 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby metalfish » Fri Sep 30, 2011 9:59 am

OK. I think I get it now.

Can anyone recommend a Solicitor with experience in this? Please PM me if you can.

Thanks again for you responses.

bellrow
Posts:1
Joined:Mon May 21, 2012 10:12 am

Re: Husband/Wife - Reducing income tax due on rent

Postby bellrow » Mon May 21, 2012 10:20 am

Maths, are you saying that the Declaration of Trust is a red-herring and rental income can only be apportioned in the same way as actual ownership specified in the Tenants in Common split?
Absolutely (where joint legal title) for married couples (non-marrieds subject to different rules).

This is quite clear from ITA 2007 s 837 and Form 17.
Hi Maths

This is my first time so please be gentle! I have read your messages intently but like others am still utterly confused, I am in the same position regarding property however, myself and my partner are not married.

We own property as joint tenants(50/50) and want to split the rental income 100/0 or 99/1 in my favour as the lower rate tax payer.

Do we draw up a declaration of trust - if so do you know any good free templates? What wording needs to be included?

Do we fill in form 17 to HMRC?

Kris2fer
Posts:4
Joined:Tue May 29, 2012 5:45 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby Kris2fer » Tue May 29, 2012 5:53 pm

Hi,

I too am in a similar situation and confused... I'd like to transfer rental income from a property to my wife who has no income. She is not on the deed and I am the listed owner. Will completing a declaration of trust so that the income is transferred to her suffice for HMRC or will we have to fill out form 17?

It’s all very difficult to understand and i think myself, like others, don't want to make a mistake that could cost us.

Is this we can do ourselves, or do we have to seek legal advice?

I look forward to a reply.

Chris

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby Peter D » Tue May 29, 2012 6:28 pm

You are posting against a thread that is 18 months old. Start you own seperate threads as the response to your two scenarios are different. Regards Peter

Incredulum
Posts:2795
Joined:Thu Dec 03, 2009 5:35 pm

Re: Husband/Wife - Reducing income tax due on rent

Postby Incredulum » Wed May 30, 2012 9:28 am

1. It’s all very difficult to understand
2. i... don't want to make a mistake that could cost us.

3. Is this we can do ourselves, or do we have to seek legal advice?
Given '1' and '2' I think '3' answers itself...

ssb321
Posts:1
Joined:Fri Aug 09, 2013 11:21 am

Re: Husband/Wife - Reducing income tax due on rent

Postby ssb321 » Fri Aug 09, 2013 11:22 am

To utilise the tax savings is relatively straightforward. Both spouses execute a declaration under which they confirm that they hold the legal title jointly for the property and that one spouse holds that title on trust beneficially for the other as tenants in common. The actual proportion will be determined by both parties written agreement on the Trust Declaration eg. 90/10. However, the income will continue to be split 50/50 until HMRC are formally notified using their Form 17. This form allows the income to be split in line with the beneficial ownership eg 90/10. Providing the completed Form 17 and a copy of the Trust Declaration are received by HMRC within 60 days the income allocation comes into effect from the date of the declaration.
There are no Land Registry fees involved since there is no change to the actual legal title and no requirement to inform any Mortgage company .A separate Declaration of Trust is required for each property.
It is a misconception that aTrust Declaration changes the actual legal ownership. HMRC Form 17 permits income from property, whose legal title is held in joint names, to be split according to the beneficial interest as agreed in the declaration of trust.
There is no limit to the number of declarations a couple may make to HMRC and a new one can be agreed at any time. However, the declaration cannot be backdated to reduce any tax burden.
Landlords need to be aware that a Trust Declaration may affect any capital gains in the event of a property sale. To minimise capital gains tax a further declaration may be appropriate prior to the sale of the property but be aware that such a declaration will be invalid after the exchange of contracts. It is suggested that any new declaration is completed once a decision has been made to dispose of an asset and in any case at least 28 days prior to exchange of contracts.

Source: http://www.taxlandlord.com/#/tax-saving ... 4566938308


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