Is this a legit way to minimise tax?

by Readers Question

18:14 PM, 16th July 2015
About 3 years ago

Is this a legit way to minimise tax?

Make Text Bigger
Is this a legit way to minimise tax?

I have been told by a ‘property accountant’ that its perfectly reasonable for me to: Is this a legit way to minimise tax

– buy a property cash in my name
– refurb it
– rent it out
– have an ‘arrangement’ where my wife gets all the rental income in exchange for ‘fully managing the property inc losses’
– the rent would be paid by the tenant directly into an account in her name
– I re-finance the property and extract my initial investment
– property is owned by me and I make the mortgage repayments but don’t need to declare any income

I am told this doesn’t need a ‘deed of trust’ but does need to be ‘written down’

Thanks

Haf Ali



Comments

Mark Alexander

18:17 PM, 16th July 2015
About 3 years ago

Hi Haf

I agree with your account.

One of his points is that you need to have it written down.

For the sake of £200 to get it right I don't know why you wouldn't have a solicitor, who is insured to give you proper advice, to sort out a Declaration of Trust for you - see >>> http://buytoletconveyancing.co.uk/declaration-of-trust/
.

haf ali

8:11 AM, 17th July 2015
About 3 years ago

Reply to the comment left by "Mark Alexander" at "16/07/2015 - 18:17":

Thanks Mark and I wasn't clear on whther or not I needed a 'deed of trust' so will look into that.
Also do you know if the above arrangement will work with anyone like extended family or a business partner/friend - or is it for spouses only?

Mark Alexander

10:16 AM, 17th July 2015
About 3 years ago

Reply to the comment left by "haf ali" at "17/07/2015 - 08:11":

Generally spouses only as there is no CGT between spouses in transfers. However, if it's done at the point of purchase it could work but equally it could have knock on effects to
.

haf ali

10:28 AM, 17th July 2015
About 3 years ago

I am not really worried about CGT but mainly focussed on income. Reason I ask is that I am doing a deal with a friend of mine where he finds/project manages/rental manages the property and therefore i am happy to give him all the income but I keep property in my name. I suspect I need some specialist advise but it does appear as if this could work using deed of trust i.e me owning and mortgaging and some-one else declaring the income rather than me

Mark Alexander

12:00 PM, 17th July 2015
About 3 years ago

Reply to the comment left by "haf ali" at "17/07/2015 - 10:28":

Three points:-

1) Be careful with terminology. A Deed of Trust is different to a Declaration of Trust.

2) If you are investing for income and not gains, why would you want to give away the income?

3) If you give the income away to a friend that money is theirs. If they choose to keep it how will you pay your mortgage and other costs?
.

haf ali

12:10 PM, 17th July 2015
About 3 years ago

point 1 - didn't realise that they were different so thanks for the info
point 2 - i am happy with my arrangement to give away the income
point 3 - i am comfortable paying the mortgage and giving away the income

Thanks for the clarification and I will do some more looking into point 1

Mark Alexander

12:14 PM, 17th July 2015
About 3 years ago

Reply to the comment left by "haf ali" at "17/07/2015 - 12:10":

That doesn't make sense to me, you said you were focussing on income but you will not have any if you give it away.

Also, the person receiving the income may well be entitled to benefits if they have no income before this transaction. After this transaction they will have income so their benefits will stop. Similarly, if this person gets a job their rental income will be taxed.

You really need some professional advice before pursuing this idea.
.

patrick maher

11:58 AM, 19th July 2015
About 3 years ago

Reply to the comment left by "Mark Alexander" at "17/07/2015 - 12:00":

How is a deed of trust different to a declaration of trust? (apart from maybe a declaration not necessarily being a deed)

Mark Alexander

12:23 PM, 19th July 2015
About 3 years ago

According to Google...

"In real estate in the United States, a deed of trust or trust deed is a deed wherein legal title in real property is transferred to a trustee, which holds it as security for a loan (debt) between a borrower and lender. The equitable title remains with the borrower."

"In the context of property, a declaration of trust is an agreement between two or more people as to how much each party is entitled to in the event of a sale of the property. contributions to a mortgage or any repairs or improvements to the property. property."
.


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

Want to avoid empty properties over Christmas?

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