Form 17 to split income?

by Readers Question

A week ago

Form 17 to split income?

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Form 17 to split income?

I have two properties in my sole name and I am a 40% tax payer. However, my wife has no income at all.

I am looking to enter her on the deed by transferring her 50% of the equity on these properties.

She will be hit with a tax bill of £3750 on £125,000, but we are ok with this.

Can I then use Form 17 to split the income 90/10 in her favor ?

Many thanks in advance.

Ridvan

Comments

Neil Patterson

A week ago

Hi Ridvan,
If you are married, you have correctly identified the first level of tax planning to consider is a restructure of your income to optimise all available basic rate tax allowances with your spouse (currently £45,000 each). The tax changes to mortgage interest relief will only affect you if your total taxable income (including mortgage interest) exceeds £45,000 a year. The Chancellor of the Exchequer confirmed in the 2017 Spring Budget Statement that this figure will increase to £50,000 by the year 2020. Restructuring income between spouses is achieved by changing the percentage of beneficial ownership of your rental properties using a Declaration of Trust which does not necessitate refinancing as you are not changing the legal ownership.

Although there is no CGT between spouses you do have to consider Stamp Duty if there is a mortgage and you are transferring a percentage that comes to a proportional amount of more than £40,000.

A Form 17 is then used to register the beneficial ownership with HMRC for tax return purposes.

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

Another alternative would be to form a partnership which is very simple to do and would provide greater flexibility. However, for HMRC to accept you are a partnership they will also need to accept you are running a business. If you never intend to purchase further rental properties this might be difficult to prove, but if you do intend to buy more properties there are other structures you might wish to consider such as forming a mixed partnership, where by one of the partners would become a limited company.

As you can see there are a number of options depending on a variety of circumstances hence a consultation with Mark is highly recommended.

Please note that consultations come with a guarantee of total satisfaction or a refund.

Marlena Topple

7 days ago

I believe that there is a CGT implication if you have previously lived in one or both of the properties and she has not. My understanding is that you will lose Private Residence Relief and Lettings Relief on the percentage that you transfer to your wife if/when you come to sell.

T B

7 days ago

Hi Neil, my freind purchased some of P118 tax planning. Can you confirm that this advice from P118,

"Now let's work a little financial magic.

By using a Declaration of Trust and filing Form 17 with HMRC we are able to transfer Steve's share of the rental profits to Linda.

There is no CGT to pay on the transfers between spouses and because there is no change to the legal title at HM Land registry there is no requirement to pay Stamp Duty or to refinance either."

T B

7 days ago

Reply to the comment left by T B at 13/09/2017 - 10:29
FYI Neil, i didnt want to post the full article as i know you sell them. However i was concerned by the conflicting tax advice?

I have taken action based on this advice so now will i have to pay £100,000s in stamp duty?

T B

7 days ago

Reply to the comment left by Neil Patterson at 12/09/2017 - 11:13
Hi Neil, my freind purchased some of P118 tax planning. Can you confirm that this advice from P118,

"Now let's work a little financial magic.

By using a Declaration of Trust and filing Form 17 with HMRC we are able to transfer Steve's share of the rental profits to Linda.

There is no CGT to pay on the transfers between spouses and because there is no change to the legal title at HM Land registry there is no requirement to pay Stamp Duty or to refinance either."

Neil Patterson

6 days ago

Hi TB,

I checked my answer with Mark first.

However, if you are looking at a potential liability of £100,000s I strongly suggest you book a consultation with Mark asap.

If anyone can help he can hopefully.

T B

6 days ago

Reply to the comment left by Neil Patterson at 13/09/2017 - 14:35
Hi Neil

Thanks for the post.

My i have a top 4 firm appointed as my advisers, but i like to do my research adn keep on top of these things.

My concern was that your advice is SDLT is payable using DoTs but P118 are selling guides which say that if you dont change the land reg then there is no SDLT in point.

Would Mark be kind enough to confirm this.

I can ask my friend to send the articles and i can forward to you?

We are talking property values with mortgages in excess of 1,25million. !!!!!!!!!

I have now advised solicitors to complete DoTs assuming no SDLT issues based on the planning strategy we bought from P118?

Could we clarify as the example in this readers question is almost identical barring the values?

Thanks for the time, i appreciate you guys are busy and arent here to give free tax advice. Just seeking clarity on your opinion as it conflicts with Marks and i think your his accountant?

Mark Alexander

6 days ago

Reply to the comment left by T B at 13/09/2017 - 15:34
Hello TB

Just to put you straight, Neil Patterson is not my accountant. He is, however, the Managing Director of Property118 Limited. My accountant also happens to be called Neil but he is a different Neil.

The eBook you are referring to recommends readers to contact us for bespoke advice. This is because it would be impossible to provide a detailed overview for every possible scenario. If there were no mortgages there would be no SDLT on transfers between spouses if the Declarations of Trust are correctly drafted.

You appear to have chosen to take bespoke professional advice from a different firm and that is absolutely fine. It is now for them to consider how best to draft the Declarations of Trust to be appropriate for your requirements and they will be accountable for that advice. As you have correctly pointed out, we are not here to give you free bespoke advice or to critique the advice you have been given by a competing firm. Our eBook has clearly inspired you to seek paid professional legal advice which is bespoke to your personal requirements, hence it has served its purpose.

T B

6 days ago

Hi Mark

Thanks, that's my confusion and my apologies re the Neil's. I am only skim reading the many helpful articles you guys put out there.

However I am still concerned that the advice in your articles clearly states:

And I paraphrase here:

No SDLT on a transfer which includes mortgages due to no change in land registry.

Now considering all advisers can get it wrong at times that's why I wanted to fact check.

But strange your MDs advice is clearly completely different to tax planning strategies 118 are selling to landlords.

This is what I was seeking clarity on?

I will of course always do fact checking and seek further advice. I appreciate like all advisers the advice is covered by strong caveats.

Again can you confirm that the strategy being sold which states no SDLT of no change in land registers is correct or not?

Or could we maybe have this conversation privately?

I don't want to pay for a consultation which then provides me with wrong advice, as you are correct my advisers have told me point blank the article you sold to my friend is incorrect and hmrc would challenge such as a failure to notify a transaction for SDLT.

Neil's opinion matches my advisers.

But the strategy 118 is selling clearly conflicts with Neil's advice, your MD of all people does not agree with the strategies his own company is selling! I don't understand.

Sorry I am not trying to be rude, and happy to discuss off the forum. However I don't want to pay 118 for the wrong advice.

If the advice in the strategy is correct and no sdlt is due of using DoT even if mortgage on the property, which is what the strategy sold by 118 says, then this is great news for me,

If you could back this up with reference to case law or legislation then I can show this to my advisers and become much more tax efficient.

I fear unfortunately that the strategy your selling is simply wrong.

If this is the case then many happy go lucky landlords who try to save money on fees will take your advice, not ratify it, and it will be very expensive as a result!

Again I am sorry that this may come across as rude. But Mark your response is not addressing the question. You are simply using advisers caveats and politics to avoid the answer I assume you don't want to give publicly.

Is this not a similar issue to the one when I got an email about landlords paying NICs.

Another blooper I think.

Anyway you have my email. Would love to have an answer, public or private I am happy either way?

I eagerly await your clarity on the advice 118 is selling!
Thank you
TB

Mark Alexander

6 days ago

Hello again TB

The guidance Neil gave earlier on in this thread was drafted by me and checked and posted by him, as is all bepsoke guidance we offer.

I am happy to have a conversation with you offline if you wish and you can call me on 01603 428501 (VOIP connection to me in Malta using a UK number) or we could also connect via Skype; MarkAlexanderTMC

In regards to the articles you are referring to, I would be happy to check the wording and to amend it if it needs amending to resolve any ambiguity. However, it is not clear to me which particular article you are referring to. Our eBooks, which are the only items we "sell" carry no such references.

As I have said before, you have not sought our advice, and if you had done so it would be correct for your circumstances.

I will forgive your own self-confessed rudeness and even the fact that you appear to be attempting to discredit me on my own blog. If your motives were sincere why wouldn't have the courtesy to contact Property118 to pose your questions via a direct email or our contact form as opposed to posting your comments publicly? Why would you be hiding behind a pseudonym and why wouldn't you name your "friend"?

I have searched Property118 article archives for the words "No SDLT on a transfer which includes mortgages due to no change in land registry." in an attempt to read what you are referring to in context. However, no such series of words exists in the search results.

If landlords choose not to pay for professional advice on such important matters as tax planning using Declarations of Trust then more fool them if they subsequently come unstuck. You claim to have sought professional advice which you claim to be the same advice as per Neil's comments and for the same circumstances. On that basis I do not understand why you have a problem.

Now please stop being rude and if you are genuine please take up my offer of a telephone conversation so that we can try to get to the bottom of what appears to be troubling you.

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