Complicated Family investment structure for first BTL?

by Readers Question

3 years ago

Complicated Family investment structure for first BTL?

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Complicated Family investment structure for first BTL?

My case seems to be quite peculiar. My partner and I are considering purchasing a small property in the UK as our first buy-to-let investment. I already own a property in the UK (where I live), whilst my partner doesn’t own any property.complicated

My mother in France has been considerably helping me with my finances in the recent years. This has enabled me to contribute to this investment at 65% with my partner contributing the remaining 35%.

My partner (British) has been working and residing in France in the last 4 years and he will continue to do so in the near future.

Considering it would be difficult for him finding a lender who recognises his foreign salary, we have decided for me to be the only registered owner and party in the mortgage. We are arranging for signing a declaration of trust for protecting his 35%.

My questions are:

– Should he compile an annual tax declaration for his 35% net renting income?
– Should this tax declaration include his foreign employment income (now not declared – he does not have any income in the UK yet)?
– I have read that the letting agency can arrange for collecting a 20% tax for foreign landlords. Is this in alternative to him declaring his total income?
– Being in the declaration of trust, does this preclude him to apply for one of the new help-to-buy tools recently announced by the Government?

– I would also like to protect my mother and I am thinking for her being in the declaration of trust for the remaining 65%. She is a pensioner in France. The only difference is that she is not a British citizen or a British domiciled. Would the same principles apply to her (declare her net rent income and pension; or having the agency collecting the 20%)?

Many thanks in advance

Cam



Comments

Chris Harris

3 years ago

Hi

I suggest taking some professional advice. You are in the field of double taxtion treaties, witholding taxes (as you recognised) and also potentially French IHT issues , whish trust me can be savage if not properly thought through and planed.

An investment in proper advice now will likely be repaid many times over in the future.

I speak as one who has lived in France and had property here in the UK.

I would suggest speaking to Virginie Deflassieux at BDO Limited. They are Guernsey based and understand both tax systems and how they fit together.

french.tax@bdo.gg

Good luck

I've waited a few hours before replying here because I wanted to include some tax based information which I had asked specialist tax advisers to provide for me .... however it seems one or two people are leaving their 31st Jan tax bill submissions to the last minute and all of our accountant colleagues haven't got time to breathe at the moment, let alone consider providing a reply for this query. Maybe in a week or so they can come on to Property118 and reply directly.

So, with just a 'mortgage mind' providing a response to your comments above;

"My mother in France has been considerably helping me with my finances in the recent years. This has enabled me to contribute to this investment at 65% with my partner contributing the remaining 35%."

So, you don't actually need a mortgage if between you you are providing 100% of the purchase price.

Unless part of either your 65% or his 35% is mortgaged?

You also state "Considering it would be difficult for him finding a lender who recognises his foreign salary, we have decided for me to be the only registered owner and party in the mortgage. We are arranging for signing a declaration of trust for protecting his 35%."

'Difficult - yes. 'Impossible' - possibly not. Speak to a professional broker. My profile link will take you to our contact details.

"–Being in the declaration of trust, does this preclude him to apply for one of the new help-to-buy tools recently announced by the Government?" Possibly not but he will have to meet with a professional adviser who can establish his full credentials and then research the market accordingly.

Hope that helps.

Puzzler

3 years ago

As far as I know, help-to-buy is for first time buyers resident in Britain so would not apply. Also you said he's not going to be on the mortgage? In which case he cannot have help-to-buy.

Who is receiving the income? If he receives 35% he should declare it but will be subject to the personal allowance so may not have to pay tax.

Your mother has 65%, your partner has 35%, so what are you contributing in order to have everything in your name? You need to consider whether joint or tenants-in-common. If you are the only one on the mortgage you risk being left with the loan if prices fall, if they rise the increase is divided equally (if joint) not in proportion to input.

You need professional advice here.


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