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Where Taxpayers and Advisers Meet

Transferring rental income tax to partner

rob3000
Posts:6
Joined:Wed Feb 03, 2010 11:51 am
Transferring rental income tax to partner

Postby rob3000 » Mon Aug 14, 2017 1:07 pm

Please excuse my ignorance on this problem, I have searched other threads but still don't really understand.

My girlfriend has been living in a council property for about 12 years and I moved in with her around 3 years ago. 18months ago she wanted to buy the property from the council but couldn't afford it on her own so I bought it with her jointly. In my eyes it is her house and I don't want any claim on it.

We now want to buy somewhere together and rent out the house we are currently in (this will then provide her a bit of a pension in the future). As I understand it any rental income will be taxed 50/50 but as I pay 40% tax and she is in the lower tax band it would make sense to transfer any tax liability to her. We can't transfer the house into her sole name for another 3 1/2 years as the council would be entitled to some of the discount that they gave us back. I suspect that when we bought the property we should have done so as Tenants in common, and not as Joint Tenants, which is what we did.

I have read about 'Form 17' and a 'Deed of Trust' but as we are not married I don't think that these apply to our situation, but I could be wrong!

So, my question is, is there anyway that we can transfer any tax liability in her favour? Can a 'Deed of Trust or 'Form 17' be used?

Thanks in advance

darthblingbling
Posts:698
Joined:Wed Aug 02, 2017 9:09 pm

Re: Transferring rental income tax to partner

Postby darthblingbling » Mon Aug 14, 2017 3:54 pm

As you are not married, you may agree a different ratio.

Ideally you should back this up in writing however, but HMRC have stated to other agents that this can be verbal. Also if your partner is to be taxed on 100% of the income, she must actually receive 100% of the income.

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

Re: Transferring rental income tax to partner

Postby maths » Mon Aug 14, 2017 5:19 pm

In whose name is the property registered; both names or just girlfriend's?

Was a declaration of trust executed and what advice in this regard did you solicitor give?

rob3000
Posts:6
Joined:Wed Feb 03, 2010 11:51 am

Re: Transferring rental income tax to partner

Postby rob3000 » Tue Aug 15, 2017 10:52 am

Thanks for your replies.

The house is registered in both names.

We didn't take any advice which in hindsight was a mistake but we didn't see this situation arising. No declaration of trust was executed.

It does sound like this is possible then, so is there a form to fill out or do we just phone HMRC?

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

Re: Transferring rental income tax to partner

Postby maths » Tue Aug 15, 2017 12:55 pm

In view of the absence of any documentation regarding how the beneficial interest in the property is held then, although rebuttable, the presumption is that you/girlfriend hold your respective beneficial interests as joint tenants (which is how the legal title is held). However, you also say that you never intended to own any part of the property; in this case it could be argued that your girlfriend already owns 100% of the beneficial interest.

It would therefore make sense for a declaration of trust (DoT) to be executed under which it is confirmed that you both hold, and have always held, the legal title in trust for g'friend 100% and you 0%.

G'friend is now entitled to 100% of the rental income which should be paid into her bank account.

Form 17 is inapplicable as you are not married. There is no need to inform HMRC. If and when HMRC raise any questions then at that time you can produce the DoT.


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