Rental Income & HMRC Form 17 - Beneficial Interest

[maths]

I don't think HMRC Manual is incorrect.

If X and Y (non-married) wish to buy a property they can in an arm's length deal agree whatever terms they want.

EG
Property cost 400k.
X and Y inject 200k each.

This would in the absence of other info produce each as having a 50% beneficial interest and a 50% entitlement to rental income.

However, they could agree that X will own 40% but will receive 60% of the rents. In essence Y has agreed to transfer a 10% beneficial interest in exchange for an extra 10% of the rents.

In this example as income entitlement does not reflect underlying beneficial interests HMRC may take a closer look but if negotiated at arm's length (with no tax avoidance motive) it is satisfactory.

Interestingly, the legislation [ITA 2007 ss 836/7] talks only about "income" but HMRC manuals talks about "profits".