Can I transfer tax liability to partner for property I own?

by Readers Question

9:01 AM, 2nd January 2019
About 2 weeks ago

Can I transfer tax liability to partner for property I own?

Make Text Bigger
Can I transfer tax liability to partner for property I own?

My partner and I have renovated a cottage and let it out to a tenant. Even though it was a joint project we bought the property solely in my name, as we thought we might mortgage it in the future for another project. I am the main earner and put in the majority of the cash. My partner is self-employed and did the renovation work.

He currently works part time and looks after our child care commitments. A mortgage adviser told me that it would be better for any future project if only my salary was considered, hence the property being in my name only. We do not have a mortgage on this property and it is worth about £110k.

We have ended up in a situation where the rental income is coming to me, then I am giving half to my partner. I believe I am responsible for the full tax liability and the perceived income is moving me close to a higher tax bracket.

My questions are:
Have I understood the situation correctly as far as the tax liability is concerned?
Could I use a ‘Declaration of Trust’ or some other means to put the property into joint names and if I did this would it result in a capital gains tax bill for my partner?

Any advice gratefully received.

Shelx



Comments

Neil Patterson

9:11 AM, 2nd January 2019
About 2 weeks ago

Hi Shelx,

Sorry to complicate matters but there is never an easy answer in isolation of all the facts, such as:
the whole portfolio details
both parties income and tax positions
mortgage amounts and the potential stamp duty liabilites as a percentage of the amount of beneficial interest transfered
future planning such as IHT etc etc etc.

Please see our tax planning page >> https://www.property118.com/tax/

It could be as simple as a Declaration of Trust and you may want to consider Mark Smith (Barrister-At-Law) advising you on this. If you email yvonne@property118.com she can help organise this for you.

Alternatively if there are other properties in you portfolio you may need to consider a full tax consultation so all factors can be taken into account.

J C

12:15 PM, 2nd January 2019
About 2 weeks ago

My understanding is, to use DoT and form 17, the property has to be owned by both parties in the first place.


Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Your Invitation to Brentwood Property Investment Seminar 20th Feb

The Landlords Union

Become a Member, it's FREE

Our mission is to facilitate the sharing of best practice amongst UK landlords, tenants and letting agents

Learn More