Joint owners but with different entitlements to rental income

by Readers Question

8:12 AM, 29th March 2016
About 3 years ago

Joint owners but with different entitlements to rental income

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Joint owners but with different entitlements to rental income

I have a few properties owned jointly with my wife and have always split the rental profits 50:50. However, my accountant suggested for tax planning (I am a higher rate taxpayer and my wife is a non-taxpayer) all the income should be allocated to my wife. To do this, all we need to do is open a bank account in her sole name, transfer the rental income and the mortgage costs etc across to this account then 100% can be shown to be hers. Don’t even need to inform HMRC.fifty fifty

However, I noticed some articles regarding completion of Form 17 for HMRC and notifying them of the transfer of income. Also some reference to SDLT and CGT, although no CGT should be due as none of them have increased in value.

I trust my accountant but the articles suggest the advice is different.

Apologies if this has been raised before but can anyone assist or point me in the right direction?

David



Comments

Adrian Hyett

13:45 PM, 29th March 2016
About 3 years ago

My understanding is that if the property is owned 50/50 the HMRC will treat any income on a 50/50 basis no matter how you try and split it up!

Mike W

13:55 PM, 29th March 2016
About 3 years ago

I think you need a professional tax accountant. My understanding aligns with Adrians. And I think you can read all about it on the HMRC website.

Laura Delow

14:10 PM, 29th March 2016
About 3 years ago

If owned jointly & remaining that way, then there's no question over CGT or SDLT & the income can be split eg 99% your wife & 1% you, especially if it is your wife doing most if not all of the admin work / overseeing of the properties.

David Aneurin

14:18 PM, 29th March 2016
About 3 years ago

Income should be split 50%-50% unless you notify HMRC that you have a different arrangement. Check with you accountant, who I suspect has suggested an easier way, which may not stand up to an inquiry by HMRC, and read the HMRC Manual or other publications.
In brief - it can be done but should be done properly

Trevor Cooper

14:27 PM, 29th March 2016
About 3 years ago

I have asked my accountant the same question, and he said that HMRC are quite clear on this. The income is treated 50:50 if the property is owned 50:50

David Aneurin

15:13 PM, 29th March 2016
About 3 years ago

I have referred you to HMRC manuals.
Laura has stated that you can split the income regardless of the the percentage owned (remember that transfers of ownership between spouses are tax free).
Mike has referred you to HMRC manuals.
What more can we say!

Sunny K

15:16 PM, 29th March 2016
About 3 years ago

The rental income could be divided between joint owners in any share you like: 50/50, 10/90, 1/99 %. You need to have a declaration of trust to show this share as beneficial interest or have tenancy in common with above share. You than need to inform HMRC with form 17 and copy of declaration of trust. I believe you could do the declaration of trust yourself and there are some DIY available online. However it is best to approach a solicitor for this. They generally charge around £250 for this.

Chris Novice Shark Bait

15:35 PM, 29th March 2016
About 3 years ago

I am interested in the same issues, but in our instance my partner and I (20 yrs on are not married) and live in separate dwellings both jointly owned in differing proportions. Do the rules differ if married or not?
Still working on my accountants tardy response.

PATRICIA SIMPSON

17:14 PM, 29th March 2016
About 3 years ago

Hello David

Your Accountant is correct. you can elect a person to receive the rental income . I do that for my brothers property.You cannot do it for the CGT that has to be separately. That has been reducted in the last budget which is good. Hopefully the properties will increase in value.

Regards Pat

Trevor Cooper

17:42 PM, 29th March 2016
About 3 years ago

how exciting! I shall challenge my accountant then as this move could help with the removal of mortgage tax relief.

On the CGT - unfortuately the one exception he made on the new reduced rates was residentioal property....

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