Assigning rental income?

[catmg]

Hi

I own a 2 bed flat which I rent out. I lived there from Nov 2003 to early Jan 2014 when I bought and moved into a second property. The flat is registered solely in my name and I have a mortgage for approximately 60% of its value. The rental income is about £17k per annum.

With the change in tax rule on property income I will be paying 40% on the income, it also puts me over the £60k income bracket so I will no longer be entitled to child benefit (I have two young children).

My question concerns whether it would be possible to transfer all or part of the income to my partner as he currently looks after our children and only works occasionally so currently has unused personal allowance and would only be subject to some tax at 20%. If so, what would have to be done to 'prove' the transfer - is it possible without transferring the ownership as I imagine he may have difficulty remortgaging the property at current rates?

Thanks for your help

c

[maths]

Transferring just the rental income is not possible.

You could execute a declaration of trust under which partner acquires say a 95% beneficial interest with you retaining 5%.He is then taxed on 95% of the rental income.

You retain legal title and partner under the declaration does not take on the mortgage (hence no SDLT charge). Depending upon the numbers you may have a CGT charge on the transfer but doubt it due to reliefs.

It has to be appreciated that partner will then own 95% beneficially and should you and he separate you cannot then simply transfer the 95% back to you (I assume you are not married but co-habitees).

[catmg]

Thank you, sounds like that could work for us. I assume they can be transferred back again, assuming both parties are in agreement. Do you know if the majority holder could force sale? Think I'm going to need to get some legal advice anyway.

Thanks again!

[maths]

Once you have declared you hold the property on trust for you and co-habitee beneficially you must act in the interests of both beneficiaries and cannot therefore unilaterally reorganise the respective beneficial interests. Effectively, you and co-habitee would need to agree any changes.

Because, say, your co-habitee is the majority holder of the beneficial interest does not mean he/she can simply enforce a sale. An approach to the court under section 14 TOLATA 1996 would be necessary.