Deed of Trust CONFUSION! HELP!

Deed of Trust CONFUSION! HELP!

11:05 AM, 30th August 2016, About 6 years ago 29

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I will try to keep this as simple as possible! Deed of Trust

I am the sole owner of 5 buy to let properties on mortgage.

I wish to remain the sole owner by way of land registry.

My wife has done majority of the leg work and finances towards the building of this portfolio – albeit in my name.

1. Can I set up a deed of trust which says she is 99% owner and therefore receives 99% rent. She does not work therefore we will make a tax saving. I work and pay 40% tax!

2. As I am sole legal owner – is it necessary to fill in form 17? From what I understand and after conducting hours of research- form 17 is for jointly held property only…?

3. If I am able to do the above (DOT without HMRC form 17). Do I simply STOP filling my self assessment with HMRC and START a new one in the wife’s name?

Please help!


Doctor Dee


Mark Alexander - Founder of Property118 View Profile

11:19 AM, 30th August 2016, About 6 years ago

Our recommended professional advisers specialise on this form of planning and will be able to answer your questions. However, before doing so they will want a lot more information about you and what you are looking to achieve. I'm guessing you've read many conflicting opinions on the web in relation to the questions you've asked haven't you?. Doubtless there will be more posted here too. That's because there isn't a one size fits all strategy and many people struggle to comprehend, let alone explain, the professional advice they've received. Sadly, mistakes are also made by professional advisers, particularly when they are general practitioners and don't deal with property taxation matters on a daily basis. This serves to add to confusion. Most mistakes don't get picked up by HMRC either, thus leaving many people in a position of having received duff advice which they continue to have faith in because it has never been challenged.

Allow me to give you another example of what you might do to achieve a similar outcome. Did you know that you and your wife could form a partnership? Did you know that a partnership can have different splits between income and capital? For example, you could own 99% of the capital but your wife could own 99% of the income. Also, did you know that under certain conditions a partnership can avoid SDLT if it incorporates? This could be particularly useful if you decide to expand your portfolio in years to come.

steve gilbert

18:05 PM, 30th August 2016, About 6 years ago

Be very careful. As Mark says there is a lot of duff advice out there that HMRC does not even pick up on YET. I was in a similar position to you. 11 properties in my name 10 encumbered wanted to split via DoT. I spent weeks researching different advice from various sources including solicitors and accountants and eventually settled on a highly recommended and expensive trust solicitor. All went well until I tried to get a mortgage. A Form A restriction was entered in the registry, which prevented me getting a mortgage without another trustee being named on the deeds , which would nullify the trust. I pushed this up to the Land Reg Lawyers, trying all sorts of things, rewording the restriction and disapplying it. All to no avail I am now stuck with all my properties legally in a trust with no way to mortgage.
Since then I have obviously been busy. I have spent the last 10 days deciphering all relevant Acts all Land Registry Practice Guidance and many Internal HMRC Manuals. Below is a list with reference of things I am certain of :-
PG15 overriding interests and their disclosure 6.4 Beneficiaries under a trust of land
An interest under a trust of land can only be protected by a restriction. A beneficiary under a trust of land should generally apply for a restriction in Form A, if a restriction in Form A has not already been entered in the register. A Form A restriction ensures that any capital money must be paid to two trustees or a trust corporation

PG24 Private trusts of land
2.1 Form A: the joint proprietorship restriction 2.1.1 Its purpose and wording
“No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.”
A Form A restriction should also be entered whenever a sole proprietor is, or becomes, a trustee of land.
If a Form A restriction is registered, it will generally be necessary for a new trustee or trustees to be appointed before land held by a single trustee on a trust of land can be dealt with in such a way that capital money arises.

HMRC internal manual Trusts, Settlements and Estates Manual
Whole of 9000's makes it very clear that for a declaration of trust to be valid it must have appropriate restrictions entered by Land Registry. Beneficial ownership (of whatever %) must be made unconditionally for whole of the income (of the % gifted) and also the capital. There are some very good examples they give.
The TSEM 9800-9890 is about using Form 17. I hear a lot of incorrect information about using the form this section will clear it up. For your situation in sum. Form 17 only applies where joint couples who actually share legal ownership (ie both names on deeds and not one with beneficial ownership only) wish to make a declaration that their beneficial ownership is actually different to their legal entitlement. They dont care who does what amount of work on business they care that 2 joint owners also have a dee of trust which elects their beneficial ownership differently from their legal.

Their is also disagreement about SDLT, I have read the manual (boring and long) it is a little ambiguous. However an absolute outright gift between husband and wife carries no SDLT, unless some consideration is given. The consideration given could be a mortgage for instance. So if your wife assumed 50% of the mortgage she could be liable for SDLT. However this is where there seems some confusion, over whether she assumes the mortgage or not. If you keep the mortgage in your sole name and the trust does not make her liable to pay her share (instead it says that you will deduct the mortgage before giving her, her entitlement) then one could argue that no SDLT is liable. The SDLT manual is not clear and some take the view that because your wife is bound by the mortgage i.e. she cant take her share of capital without the mortgage first being paid, then she is liable for SDLT. A difference of opinion, all I can say is my solicitor took the view of no SDLT liability I have since passed this by HMRC and they have accepted that they are happy that I am NOT liable for SDLT (for whatever their opinion is worth cos they seem to chop and change).

Really sorry for long post but because of my difficulties this is an area I am familiar with and is causing me many problems
To recap HMRC will accept DoT provided it is correctly implemented (oh and their own manual states that they wont verify a DoT to be compliant even if you send it in so don't take their word). To be correctly implemented a Form A restriction must be entered on deeds, see Law of Property Act 1925 and Land Registration Act 2002. If there is only a sole owner on deeds (having legal ownership anyone with beneficial does not count) you cannot sell or mortgage/ remortgage without appointing someone else on deeds and thus nullifying the trust. If one has a jointly owned property then you can use Form 17 and make Trust without this problem as the 2 Trustee's on deeds are allowed to make a disposition.
I can only agree with Mark as to why this problem does not get mentioned more. Probably either incompetence of HMRC along with Land Reg being unaware of the existence of the trust or HMRC will pick up on these things when it comes to sale and then say there was not a valid DoT and backtax as if the DoT never existed

Stuart Macintosh

10:35 AM, 3rd September 2016, About 6 years ago

Hi Steve,

Why are you experiencing difficulties remortgaging as I believe you do not need to inform HMLR about the DoT? Are your sure HMLR have to been informed for the DoT to be valid?

Forgive me if i'm confusing a deed with HMRL here but can you clarify your experience behind "Form A restriction must be entered on deeds", this would be most useful. Thanks

David Mensah

11:07 AM, 3rd September 2016, About 6 years ago

Reply to the comment left by "Stuart Macintosh" at "03/09/2016 - 10:35":

1. Can I set up a deed of trust which says she is 99% owner and therefore receives 99% rent. She does not work therefore we will make a tax saving. I work and pay 40% tax!

Yes, that is straightforward.

2. As I am sole legal owner – is it necessary to fill in form 17? From what I understand and after conducting hours of research- form 17 is for jointly held property only…?

Form 17 follows beneficial ownership, not legal ownership. So if you want to have her receive 99% of the rent she needs to be the 99% beneficial owner of the capital as well (unless you can form a partnership as Mark suggests). The rental split follows capital split rule only holds for couples, not for other business partners.

Spouses can gift to one another without incurring CGT, but be careful when there is a mortgage involved -- see

"Example 2 - you pay SDLT even though no money changes hands
The owner of a property valued at £500,000 with an outstanding mortgage of £400,000 transfers half the property to their partner when they marry. Their partner takes on 50% of the mortgage (£200,000).

HMRC charge SDLT on the amount paid for a property or the amount of ‘consideration’ given.

By taking liability for the mortgage, the owner’s partner has given ‘consideration’ of £200,000 for their share of the property which is £1,500 SDLT (0% of £125,000 + 2% of £75,000).

They must pay SDLT on that amount and tell HMRC about the transfer by filling in an SDLT return."

Also, if your wife contributed significant finances to the properties, it may be that she is already the beneficial owner of a large percentage of the properties. Note that a DoT can be verbal (see e.g. ) and so exist even though you haven't written it down. Nevertheless, HMRC will want a written one if you file form 17, so it may be worth formalising what is already in existence.

Also, if she was in fact the beneficial owner, then HMRC will want to tax you 50/50 on rental income over the whole period of joint beneficial ownership, regardless of the capital split, *unless* you file a form17.

As long as the "consideration" is below 40,000 then the dreaded new 3% SDTL doesn't kick in, so if your wife was effectively a beneficial owner from the start, you may need to transfer her less and may slip under the SDLT limit.

3. If I am able to do the above (DOT without HMRC form 17). Do I simply STOP filling my self assessment with HMRC and START a new one in the wife’s name?

If you receive 1% of the rents, you still need to fill out the property section on your self-assessment forms.

Another thought: ff your wife does a lot of work on the properties, it is possible that you could also pay her a salary for her work, which would reduce your rental income, although she would of course have to pay tax (and possibly NI) on her income.

David Mensah

11:14 AM, 3rd September 2016, About 6 years ago

I just read Steve Gilbert's super helpful post -- I think I am wrong about form 17 being needed if your wife is not a legal owner.

He also suggests a way of transferring ownership without a consideration.

Stuart Macintosh

11:26 AM, 3rd September 2016, About 6 years ago

Hi David, I have taken professional advice from solicitors and accountants recommended through this website and I have been informed that your questions number 1 is correct as what I have done and been advised to do is is a DoT on a BTL 99% to me wife and 1% to me. My wife pays tax on the rental income she receives at her 20% marginal rate, and I pay tax on the 1% at my 40% marginal rate. This is simple and very straightforward. I am the soul owner of the property.

To answer your questions number 2, I've been advised that Form 17 does not apply to me as I'm the soul property owner (this is only for joint ownership).

Your point 3 is absolutely yes for the former part re the tax return, i'm not sure for the latter part re a salary to her.

I have not been advised by these professionals or considered Steve's point myself of (Unless I've interpreted it incorrectly) that he has found/believes that for a DoT to be valid a restriction needs to be placed on the deeds at HMLR, IF this restriction is placed you can't remortgage as I'm the soul owner of the property. What I need to clarify is, is a DoT valid if there is no restriction placed on the deed.

Great and useful conversation, thanks to all who have posted.


11:27 AM, 3rd September 2016, About 6 years ago

Reply to the comment left by "Stuart Macintosh" at "03/09/2016 - 10:35":

"2. As I am sole legal owner – is it necessary to fill in form 17? "

I should not step on Steve 's toes as he probably has more experience of trusts on his little finger than I have, but it is importance to remember that a DoT does fundamentally change the ownership of a property, even if one name was only entered on the land registry initially. The property effectively becomes jointly owned through the Trust and that is why they need to know.

For example, if the property was considered for compulsory purchase by the government, all owners would need to be contacted and the LR would be the information source. In fact the 99% beneficial owner would be the one most affected by compulsory purchase!

David Mensah

11:51 AM, 3rd September 2016, About 6 years ago

one more thought in reply to Steve and Stuart:

I think the form A restriction simply records that the property is being held as tenants in common instead of joint tenants. The wording is
"‘No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.’

and if you see it on a land registry title, it means tenants in common. In fact it is, I think, always needed if a property is held as tenants in common. Presumably this is what HMRC will challenge if you claim to have a DoT in unequal shares, but no evidence that you are not holding property a joint tenants, which is what HMRC assumes is the default (see an excerpt from their Trusts manual below)

If there are two more legal owners (up to 4 allowed on the titles) then usually no one is bothered by this wording. For example, the legal owners could also be the beneficial owners in equal shares, but just not want the other to automatically inherit the property upon death.

Presumably the advice Steve was given is that he still needs the restriction registered on the title, even though he is the sole name on the legal title. Then of course the form A restriction is a flag that tells a mortgage company that there is someone else is lurking behind the scenes.

Am I understanding this right Steve?

Perhaps an expert can say whether or not the form A restriction is indeed needed with a single legal owner to confirm tenants in common for HMRC, or whether other pieces of evidence will be sufficient. My reading of the HMRC advice below is that a valid DoT will be enough.

Here is some further background from HMRC's Trust manual

Ownership and income tax: legal background: joint ownership - presumption of joint tenancy

Where property is held in the joint names of ‘A and B’, it is presumed to be held beneficially as joint tenants, as described in TSEM9210.

This presumption can be displaced by evidence to the contrary, such as:

1) A declaration of trust of equal or unequal shares. For example, if there is a valid declaration that the property is held 25% for A and 75% for B.
2) In the case of real property, there is a restriction in Land Registry Form A. This restriction usually means that there is a tenancy in common instead (TSEM9220).
3) Notice of severance of the joint tenancy by one of the joint owners.
An act of severance- such as the bankruptcy of one of the owners or one owner taking out a loan secured on the property.
4) Evidence of a resulting or constructive trust - see TSEM9610-9620.
If there is such evidence, the ownership is as described in TSEM9220 instead of as in TSEM9210.

Stuart Macintosh

12:38 PM, 3rd September 2016, About 6 years ago

Reply to the comment left by "H B" at "03/09/2016 - 11:27":

HB - A DoT does not change the legal owner of a property, the legal owner can only be changed at HMLR. A DoT changes the beneficial rights of the benefits/proceeds from the property i.e rental income or sale. i.e my DoT is 99% to my wife and 1% to me, she is legally entitled to 99% of the benefits arising form the flat (the rental income) and I am entitled to 1%. I legally own the flat but effectively hold it on trust for her.

Stuart Macintosh

12:51 PM, 3rd September 2016, About 6 years ago

Hi Steve/David, I'm sorry but i'm now really really confused by your posts. I'm not sure if i'm interpreting them correctly so If I explain my situation can you clarify.

I own a BTL property and mortgage in my soul name and have entered a DoT, 99% to my wife and 1% to me. To confirm this is NOT joint tenants or tenants in common. My wife is not named as an owner or part owner with HMLR.

Question - does a restriction have to be placed with HMRL to make the DoT valid? therefore meaning i'll have difficulties remortgaging? i.e when a mortgage company does a search on the property they'll find there is a restriction (i.e there is a beneficial owner (my wife)) and i'll have difficulties remortgaging?


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