PROPERTY RENTAL INCOME SPLIT - equity tfr?

by **zzzzzz** on Fri Jan 13, 2012 11:38 am

My wife pays no tax while I pay the lower rate. I have income from a property which would mop up her annual allowance and save me the tax, but I am not sure if HMRC will require me to have transferred part of the equity to her (the property is registered in my name only), or is being husband and wife enough?

by **section 44** on Fri Jan 13, 2012 11:42 am

zzzzzz wrote:is being husband and wife enough?

No, it isn't.

Your wife would need to have a beneficial interest in the property to be entitled to any rental income. Your wife acquiring such a beneficial interest now would not have retrospective effect.

by **zzzzzz** on Sat Jan 14, 2012 11:34 am

Thanks for that, so is her beneficial interest the same thing as the proportion of equity she would then own, pro rata to time owned?

by **section 44** on Sun Jan 15, 2012 9:54 am

Strictly, yes. Although some people refer to the equity as being the difference between market value and mortgage.

by **King_Maker** on Sun Jan 15, 2012 1:12 pm

A transfer to the spouse of a % of the beneficial is not enough.

Form 17 has to be submitted to HMRC - there is a Time Limit of 60 days.

by **maths** on Sun Jan 15, 2012 10:01 pm

Re King-Maker's comment, it is only necessary to file Form 17 if the legal title (currently held in your name only) is transferred into joint names; if legal title remains held in your name only and a declaration of trust is executed no Form 17 need be filed.

by **King_Maker** on Mon Jan 16, 2012 10:46 am

maths wrote:Re King-Maker's comment, it is only necessary to file Form 17 if the legal title (currently held in your name only) is transferred into joint names; if legal title remains held in your name only and a declaration of trust is executed no Form 17 need be filed.

maths and I disagree (and have always disagreed) on this point.

If my analysis of sections 836 & 837 ITA 2007 is correct, failure to file a valid Form 17 within 60 days means that any split other than 50:50 is ineffective.

However, if maths is correct then Form 17 is unnecessary. And, therefore, the 60 days time limit does not apply.

IMHO, the consequences of being wrong could be more damaging from maths's interpretation. Mine merely results, possibly, in extra paperwork.

Prudent advice would seem to indicate that it's a good idea to always file a Form 17?

by **section 44** on Mon Jan 16, 2012 3:23 pm

Agreed re why not file form 17. The only downsides that I can see are cost/hassle and unnecessary disclosure (which may prompt enquires/action by HMRC).

As I have previously posted, only a strict interpretation of the law would form 17 only be required where spouses (only) hold joint legal title. On a purposive interpretation it could be in point where (say) spouses and one or more other person(s) hold joint legal title or where spouses only hold jointly in equity but not in law.

by **maths** on Mon Jan 16, 2012 4:08 pm

Your memory King_Maker is much better than mine; I was unaware that we had disagreed on this point in the past although I do recall a discussion with section44 not that long ago.

Without thrashing over all the old ground I do not accept the comments by King_Maker or section 44 re Form 17 lodgement.

As indicated on Form 17, it refers to "Property held in joint names" and s 836 refers to "...held in the names of individuals".

If property is thus held in the name of one individual only it is not held in joint names and thus filing a Form 17 is not technically possible and should be rejected by HMRC; I do not therefore accept that it is prudent to file it although I understand the sentiment as to why you each believe no harm is done.

by **King_Maker** on Mon Jan 16, 2012 5:40 pm

maths wrote:Your memory King_Maker is much better than mine; I was unaware that we had disagreed on this point in the past although I do recall a discussion with section44 not that long ago.

Without thrashing over all the old ground I do not accept the comments by King_Maker or section 44 re Form 17 lodgement.

As indicated on Form 17, it refers to "Property held in joint names" and s 836 refers to "...held in the names of individuals".

If property is thus held in the name of one individual only it is not held in joint names and thus filing a Form 17 is not technically possible and should be rejected by HMRC; I do not therefore accept that it is prudent to file it although I understand the sentiment as to why you each believe no harm is done.

But once an appropriate Declaration of Trust is established, is not the property then jointly held?