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Where Taxpayers and Advisers Meet

Changing property equity share -Form 17 BLT income and subsequent sale of it

andrewlato81
Posts:13
Joined:Sun May 15, 2016 10:28 pm
Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby andrewlato81 » Wed Mar 06, 2024 1:06 am

Hello,

Between wife and I ,we jointly own two tenanted BTLs (no mortgages ATM) and since 2017 have declared all property rental income on 50/50 basis.

Going forward we need to change our intrest in both properties to unequal share to 90/10, as my income is too close to 40% tax now, while wife is not working ATM. I understand this is done via declaration of trust (between owners) and form 17(submitted to HMRC in 60 days from signing it).

Questions:

1. Can such declaration be done without solicitor ie: both party fill details and sign DoT? My understanding is that HMRC only needs to receive Form 17 not the DoT, to recognise/register unequal share in property.

2. Form 17 - once submitted/registered with HMRC- does the new unequal share then applies to all tax matters for that property ie: rental income and CGT when selling the property or is it purely for rental income?


Many thanks
Andre

bd6759
Posts:4296
Joined:Sat Feb 01, 2014 3:26 pm

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby bd6759 » Wed Mar 06, 2024 7:09 am

1. HMRC ask for evidence. https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

2. The property is owned in unequal shares. That applies for all purposes, not just tax.

andrewlato81
Posts:13
Joined:Sun May 15, 2016 10:28 pm

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby andrewlato81 » Fri Mar 08, 2024 10:33 am

1. HMRC ask for evidence. https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

2. The property is owned in unequal shares. That applies for all purposes, not just tax.
Thank you bd6759 for your reply.

The reason I asked Q2 was this:
I have found on Lesstaxforlandlords website https://lesstaxforlandlords.co.uk/landlord-tax-planning/form-17/ :

Here are the facts:

Form 17 is only used if the beneficial interests are unequal
Form 17 can be used on any type of property provided it is held ‘jointly’ (excluding beneficial joint tenants)
Form 17 cannot be used to change the income split back to 50/50
The change in beneficial interests does not affect capital gains tax for married couples and civil partnerships though Stamp Duty Land Tax (SDLT) MAY arise if the transaction involves ‘chargeable consideration’ in the form of say a cash payment or transfer of debt, although this can usually be avoided or mitigated.


It appears from above information that changes to shares/equity via Form 17 do not affect CGT for married couples.

If I was to change the split to 90/10 in favour of my wife from new tax year, and then sell the property couple of years down the line- would gain and CGT be calculated according to that split?

And can Deed be drawn/registered without solicitor? What does it accually involve?(apart from writing/signing one). Does this need to go Land registry, Trust Service etc?

someone
Posts:699
Joined:Mon Feb 13, 2017 10:09 am

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby someone » Thu Mar 14, 2024 10:35 am


It appears from above information that changes to shares/equity via Form 17 do not affect CGT for married couples.
This is correct but you've got what form17 does backwards.

CGT always follows the actual ownership proportions regardless of any form 17 or not.

IT (weirdly!?) doesn't and income is 50/50 regardless of actual shares owned unless/until a form 17 is submitted.

bd6759
Posts:4296
Joined:Sat Feb 01, 2014 3:26 pm

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby bd6759 » Thu Mar 14, 2024 11:21 pm

Form 17 doesn’t change equity. It is simply an election to pay income tax in the same proportion as the equity.

Married couples are taxed 59/50 on joint income unless they elect to pay in proportion to their actual equity.

Capital gains tax is always paid according to equity, so will be taxed per the form 17 (albeit form 17 isn’t necessary).

andrewlato81
Posts:13
Joined:Sun May 15, 2016 10:28 pm

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby andrewlato81 » Mon Mar 25, 2024 12:06 pm

Thank you for your replies @bd6759 and @someone

I hope I am getting this right in my head now- if not please explain.

Next week I'm in for Declaration of Trust to change equity from 50/50 to 90/10 at local solicitors - cost £200+Vat + LR fee

After that I'll send Form17 to HMRC to elect new 90/10 equity for BTL income from new tax year.

That should sort out issue of my income going into 40% tax bracket as 90% of rental income will now be on wife(currently not working).

Last q's:

For last 7 years- I and wife owned both properties on 50/50 basis. Now if we change that equity to 90/10 from 6th of April 2024, let's say we sell these properties in three years time-is CGT going to be calculated based on last equity declaration alone(in this case 90/10) or is it going to be somehow calculated based on 50/50 for first 7 years of ownership(in this case a valuation would be needed at the point of DoT I think?) plus further calculation based on equity 90/10 for last three years?

Hope that makes sense.

Many thanks
Andre

AGoodman
Posts:1767
Joined:Fri May 16, 2014 3:47 pm

Re: Changing property equity share -Form 17 BLT income and subsequent sale of it

Postby AGoodman » Mon Mar 25, 2024 12:57 pm

90:10
your wife will be the 90% owner and you will be the 10% owner. Her base cost on the sale will be 90% of the (total) original acquisition cost as she inherits the base cost from you for the 40% you are gifting her.


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