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Where Taxpayers and Advisers Meet

Rental Income & HMRC Form 17 - Beneficial Interest

langtonbrow
Posts: 35
Joined: Tue Mar 10, 2009 1:52 pm

Rental Income & HMRC Form 17 - Beneficial Interest

Postby langtonbrow » Wed Jun 07, 2017 10:31 pm

Hello,

Can I claim beneficial interest split from the date HMRC received form 17 or the earlier date referenced on the Declaration of Trust which indicates unequal shares?

with regards
L.

maths
Posts: 7562
Joined: Wed Aug 06, 2008 3:25 pm

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby maths » Wed Jun 07, 2017 10:57 pm

Form needs to be lodged with HMRC within 60 days of date of declaration.

Declaration has effect for income arising on or after date of declaration

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby someone » Thu Jun 08, 2017 8:47 am

Isn't it within 60 days of deciding to split the income as per the DoT, rather than 60 days from the DoT?

Otherwise, it would mean that a H&W who owned a home in unequal shares and then later decided to let it could never take advantage of form 17.

(Maybe that's what you meant by declaration)

maths
Posts: 7562
Joined: Wed Aug 06, 2008 3:25 pm

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby maths » Thu Jun 08, 2017 12:38 pm

For clarification the rule is set out in ITA 2007 s836 and 837.

Form 17 is relevant to a married couple the legal title to which is in their joint names and the beneficial ownership is split in unequal shares (eg 60/40).

The 50/50 split does not apply where "a declaration is made under s837" [s836(3)].

The declaration itself needs to be lodged with HMRC within 60 days of date of declaration [s837(3)].

The reference to "declaration" is a reference to Form 17 not the declaration of trust.

It is the declaration of trust which provides evidence of the unequal split of beneficial shares/income.

Berkshire45
Posts: 3
Joined: Tue Apr 18, 2017 4:53 pm

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby Berkshire45 » Wed Jun 28, 2017 6:06 pm

I own a second home with my non-married partner. Do we have to complete this form or any declaration of trust in order to change the beneficiary for tax on the rental income?

We would like the rental income tax to go to one of us only, we bought it in 2010

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby someone » Thu Jun 29, 2017 8:11 am

You are unmarried therefore form 17 is completely irrelevant to your situation.

See this:
https://www.gov.uk/hmrc-internal-manual ... al/pim1030

However, there's a complication that in 2009 (I think) there was new legislation related to transfers of income streams that can mean that the transferor can remain taxed on the income.

My, non-expert, opinion is that if the income stream is not guaranteed then it looks more like a callable bond income stream which (probably) means that the taxable value of the transferred income is negligible.

e.g. You currently each own 50% beneficial interest (capital and income) via DoT (tenants in common). You transfer your share of the income to your partner. But the DoT (probably) has a clause that either party can trigger a sale of the property to extract their capital investment. As a result of this, the additional 50% income has negligible market value (How much would you pay for the income from an asset if someone else could unilaterally trigger its sale and receive the capital - hence my comment about callable bonds)

I do not believe you need a DoT to transfer the income. A signed statement to that effect is sufficient. (then again, I could be wrong...)

N.B. It is important that your partner actually gets the income. Safest way is probably to pay it into an account that only she controls. Even if she then pays it into a joint bank account it's then fairly obvious that it was her money and she decided what to do with it.

If the property is mortgaged then she will (I believe) only be able to claim mortgage interest tax relief on her share of the mortgage.

But wait for the experts to correct me!

maths
Posts: 7562
Joined: Wed Aug 06, 2008 3:25 pm

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby maths » Thu Jun 29, 2017 4:36 pm

A simple declaration of trust granting a beneficial interest in the property needs to be executed; along with the beneficial interest comes a right to the rental income in the same %.

Transferring just a right to a rental income stream is ineffective.

No Form 17 necessary.

% split can be, for example, 50/50; 60/40; or 100/0 or whatever. If 100/0 then partner would have the right to call for the legal title (whioch currently only you own); 99/1 better.

Mortgage, if any, issue needs to be addressed.

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby someone » Fri Jun 30, 2017 7:32 am

A simple declaration of trust granting a beneficial interest in the property needs to be executed; along with the beneficial interest comes a right to the rental income in the same %.

Transferring just a right to a rental income stream is ineffective.
I'll accept that this is the case but I don't understand why HMRC leave that PIM1030 document up and unchanged. Why don't they either take it down or correct it? They've certainly archived other documents that are no longer relevant.

maths
Posts: 7562
Joined: Wed Aug 06, 2008 3:25 pm

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby maths » Fri Jun 30, 2017 3:35 pm

Which bit of PiM 1030 are you referring to?

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Rental Income & HMRC Form 17 - Beneficial Interest

Postby someone » Fri Jun 30, 2017 3:46 pm

Jointly owned property - no partnership
Where there is no partnership, the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.

It then goes on to cover the case when the joint owners are married.


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