Declaration of Trust to Company Questions

by Readers Question

10:51 AM, 7th July 2017
About 2 years ago

Declaration of Trust to Company Questions

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Declaration of Trust to Company Questions

I’ve been researching the merits of buying a property as an individual, and creating a Declaration of Trust (DoT) to nominate the beneficial owner as my company.

What I have determined so far is:

• The mortgage lenders take their security against legal ownership ie the individual.

• The legal title at HM Land Registry does not need to be changed when transferring beneficial interests via a DoT

• There is no requirement to advise or seek consent from mortgage providers. This is because their security remains unchanged.

• Form 17 would not be applicable as property is owned by one person a DoT.

I have the following remaining points to resolve

1. Has anyone done this already?
2. If so, what has HMRC said on the topic?
3. With a DoT in place, can the mortgage interest relief be claimed by the company?
4. Can you have multiple properties with BTL mortgages in your own name and would you have a DoT in place for each property?
5. Can a DoT be amended in the future and if so who by?

Many thanks

Rob



Comments

Ramus Wood

1:22 AM, 9th July 2017
About 2 years ago

Reply to the comment left by "Neil Patterson" at "07/07/2017 - 14:04":

I am a solicitor. I understand trusts and the difference between legal and equitable (beneficial) title, and mortgages, REALLY well.

I would repeat: err on the safe side and ask your lender if they're OK with a DoT. If they are, they won't object (surely).

rob hales

10:54 AM, 10th July 2017
About 2 years ago

Reply to the comment left by "Ramus Wood" at "09/07/2017 - 01:22":

Hi Ramus
Who's advice should I be asking for when it comes to DoT as I'm somewhat confused?

As this is is a legal document, a solicitor could draw this up, however there are tax implications and I don't want to upset HMRC, so a Tax Advisor, or an Accountant? and then there is the mortgage broker as well.

Is there one person whom I can work with to address these points with professional indemnity?

R

Ramus Wood

11:36 AM, 10th July 2017
About 2 years ago

Reply to the comment left by "rob hales" at "10/07/2017 - 10:54":

Rob - you should be working with all of the above, but in the following order:
1) a reputable broker (and preferably one that can contact your lender(s) on a no names basis (ie without saying who the specific borrower is) to ask how they would view this and what (if any) consent you need

2) tax advisor
3) solicitor

Ramus Wood

11:54 AM, 10th July 2017
About 2 years ago

Reply to the comment left by “rob hales” at “10/07/2017 – 10:54“:

Rob – you should be working with all of the above, but in the following order:
1) a reputable broker (and preferably one that can contact your lender(s) on a no names basis (ie without saying who the specific borrower is) to ask how they would view this and what (if any) consent you need

Also ask them whether you will need to prove what (if any) income YOU have from property the next time you need to remortgage (any of) your properties. Under the new PRA rules, you WILL be asked this after September 2017 if you have a portfolio of 4 or more properties.

If your ,company has the benefit of the income (and that's what you've declared to HMRC), you cannot say to a mortgage lender that YOU have the benefit of the income come remortgage time. You may end up between the rock and the hard place of having to choose between tax fraud and mortgage fraud.

2) Tax advisor.
After you get past point (1) (KNOWING the risks and deciding whether or not you are OK with them), you need to speak to a reputable tax advisor about whether this structure will achieve what you want it to achieve. You must NOT rely on "leading counsel opinions", unless you yourself are actually a paying client of the specific counsel. If you are wondering why, read this: https://waitingfortax.com/2014/08/07/weak-transmission-mechanisms-and-boys-who-wont-say-no/

and this: https://www.gov.uk/government/publications/spotlight-29-dont-fall-for-it-misleading-claims-made-by-tax-avoidance-scheme-promoters/spotlight-29-dont-fall-for-it-misleading-claims-made-by-tax-avoidance-scheme-promoters

3) Solicitor
To document everything you've decided properly.

Mark Alexander

6:51 AM, 11th July 2017
About 2 years ago

Remus makes this sound very complicated, but it isn't.

Broker is not required. Counsel will tell you whether your mortgage terms preclude transfer of beneficial interest or not.

HMRC's position is very well established, they tax the beneficiary. No requirement for tax advice.

Cotswold Barristers charge £250 + VAT per property for DoT's.
.

rob hales

9:44 AM, 12th July 2017
About 2 years ago

Hi Mark
Your comments are written with assurity on the HMRC point, could you expand on what evidence you have on their position being well established. I tried to speak to them about this, however they refused to provide me any guidance, which seems somewhat insane.

Also when you say "Counsel will tell you whether your mortgage terms preclude transfer of beneficial interest or not." Who are referring to with Counsel, is that the mortgage companies solicitor or my solicitor?

Regards
Rob

Terry

14:42 PM, 15th June 2018
About A year ago

hi everyone,

can i ask if i do the dot for the property, for example, 1% still goes to me, and 99% goes to the company,

then do i need to change the direct debit of the interest payment from my personal account to the company account?

many thanks
kind regards,

Yi

Mark Alexander

14:46 PM, 15th June 2018
About A year ago

Reply to the comment left by Elep at 15/06/2018 - 14:42
If that is something you are seriously considering you need to book a landlord tax planning consultation. The tax consequences could be horrendous if this isn't properly thought through!

Please see https://www.property118.com/tax/

Terry

15:44 PM, 15th June 2018
About A year ago

Reply to the comment left by Mark Alexander at 15/06/2018 - 14:46
thank you Mark,

i will have a read through the link you sent,

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