Passing Ownership to Wife: PRR relief and CGT implications

[maths]

You seem determined to persist with your own view despite comments by others; you have failed to understand in particular Form 17.

However, you are of course entitled to your own views.

[KarenF]

Dear Maths,

I actually don't have strong opinions on much. I am simply interested in learning the truth, as per pure empiricist epistemology (i.e. weighing the evidence) in honour of my Cambridge education. Obviously, I didn't know anything about this till Peter introduced me to the concept, but having now done substantial research and spoken to half a dozen solicitors, I am not convinced that keeping the joint tenancy in title is what Form 17 is predicated on or intends.

The particular sentence I have quoted, you haven't explained, and I don't think it makes sense for HMRC to write, 'Don't use this form for joint beneficial ownership' when the form is, according to you, used to declare the very change of beneficial ownership on a joint tenancy (which of course has moved from a joint beneficial ownership to an split and unequal beneficial ownership on joint tenancy). This would be saying, 'Don't use this form if you haven't done the trust deed yet', which would appear somewhat silly and confusing to lay people for whom this form is intended (it isn't intended for solicitors). Since there is no requirement that a trust deed actually be performed by a solicitor or registered against the title, there would, in my current view (which could change, if you furnish me with some argument/evidence), be an underlying assumption of a minor change in the way th title is held, namely a change to tenants in common. Otherwise, the HMRC would open itself up to a host of backdated and home-made declarations (I myself got one online, out of curiosity).

I think you have identified a short-cut, but I don't think that is the intention with Form 17. I will be more than happy to be proved wrong on this, but with some reference (I at least quoted a sentence from the document itself). I don't have any personal pride in this discussion, which is one of simply establishing proper practice and avoiding future problems, and I trust no one else has either.

[section 44]

in honour of my Cambridge education.

That is unfortunate. Rather than getting bogged down with Form 17 why not consider the law? Sections 836 and 837 of the Income Tax Act 2007 are the relevant provisions. On a literal (even if, arguably, not purposive) interpretation those provisions seem clear enough.

[section 44]

the way th title is held, namely a change to tenants in common

No. I'll say it yet again. In law (i.e. the registered proprietor/legal title) real property may only be co-owned as joint tenants and not tenants in common. In equity (i.e. trust) real property may be held as joint tenants or tenants in common.

If there is no trust, the beneficial ownership is deemed to follow legal ownership. Under section 836 ITA 2007 a husband and wife co-owning real property are deeded for income tax purposes to be beneficially entitled to income equally unless they have filed form 17 with HMRC. The purpose of form 17 is to confirm some alternative (i.e. not 50:50) sharing of income which would only arise if there has been a trust declared (whether or not by reason of a document labelled a declaration of trust). Form 17 is not effective to declare a trust, it is a reporting requirement only.

[pqtaxation]

....Otherwise, the HMRC would open itself up to a host of backdated .... declarations ...

Re your concern over (a host of) backdating, have you read the bottom of page 2 of Form17 "What to do next" which reads:

• Send this completed form to your tax office within 60 days of the date the declaration was made.
• Send evidence of the beneficial interests you have declared.

Does that assuage your concern over HMRC's openness to backdating? -- though I have not checked the legislative authority for that 60 days requirement.

I think some of the/your confusion over the wording of Form 17 arises from HMRC not distinguishing there between legal and beneficial ownership. If the word either "legal(ly)" or "beneficial(ly)" is inserted before each of their references to held, belonged, ownership,shares then the meaning IMO becomes clearer.

[maths]

Im afraid we appear to be going round in circles.

Form 17 cannot be understood without knowledge and understanding of ITA ss 836 and 837.

The quote from Form 17 simply states that if H and W own their beneficial interests as joint tenants then the Form cannot be used. The Form can only be used if beneficial ownership is held as tenants in common because only if held as such can income be split between H and W other than 50/50.