Tax Notification on transfer to joint names?

by Readers Question

11:51 AM, 4th July 2016
About 2 years ago

Tax Notification on transfer to joint names?

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Tax Notification on transfer to joint names?

For tax efficiency purposes I had a property put into joint names – a transfer of title exercise.HMRC

Is there a document or form I have to complete and send to HMRC of what I have done ?

My lawyer has done all the other bits relating to the property transaction etc. There is nothing on the HMRC website and try calling them if you can get through, and that’s a big if, a technical question will be referred to a technician who will never phone back.( One wonders why I pay my taxes at times – certainly not for the stipulated services)

My guess is you just declare this on the self assessment but given we have the most complex tax system on the planet common sense is not always obvious to HMRC.

Thanks in advance.

Asif



Comments

Mark Alexander

12:26 PM, 4th July 2016
About 2 years ago

Hi Asif

Why didn't your solicitor deal with the form 17? Link https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17

Why didn't your solicitor use a declaration of trust to split the beneficial interests? The way he's chosen is far more expensive, what was his reasoning for this method?

If you had a mortgage on the property you should have had to refinance based on the method your solicitor has used. Did you have a mortgage and did you refinance? If not, you have a problem.

Did your solicitor deal with Stamp Duty (or LBTT if the property is in Scotland)? If not, and if the value of the transfer was over £40,000 you may have another problem.

If your solicitor has been negligent then you have a claim against him. See the member profile for Mark Smith (Barrister-At-Law) >>> https://www.property118.com/member/?id=1945
.

AA

17:01 PM, 4th July 2016
About 2 years ago

Reply to the comment left by "Mark Alexander" at "04/07/2016 - 12:26":

Hi Mark - For the following reasons.
HMRC advice to their staff
Below is an extract of specific guidance given to HMRC staff:
You may get claims that, while property is held in A’s name, it is owned by B, or that B is entitled to all the income. A common feature of such claims is that B is taxable on income at a lower rate than A, and/or has personal allowances to use. Some claims will be acceptable, others will not.

The taxpayer you are enquiring into would be A, who has potentially understated income. In some cases, B may have already paid tax on the income. In such a case, if A is ultimately taxable on the income, B may make an overpayment relief claim subject to the normal rules.

The arguments put forward about income tax may differ from those put forward about ownership of property for non-tax purposes. For non-tax purposes, often the claimant asserts that the property belongs to them, whereas for income tax purposes the (higher rate) taxpayer is likely to claim that the property (or income) does not belong to them. The cases that this guidance is concerned with involve two or more parties together alleging that a certain beneficial ownership of property or income exists. The parties are in agreement, but HMRC may disagree.

Also

• Sole name - Settlements legislation
• A and B are civil partners. A is a higher rate taxpayer, and B has no taxable income.
• A purchased a house in his sole name. It is rented out. A does not return the rents, and says that he has transferred the right to all the rents to B.
• ITA/S836 does not apply, because the property is not in joint names.
• Even if there is a valid declaration showing that A has effectively transferred the beneficial interest in the income to B, the Settlements legislation applies to deem the rents to belong to A. A has ‘retained an interest’ if the property or income may be applied for the benefit of A or A’s civil partner. The exception for outright gifts to spouses or civil partners does not apply because only the right to income has been transferred - not the underlying property

Basis I have mortgages and legal titles in my name - Form 17 and declaration of trust N/A

Well certainly not from every example I read from HMRC.

Mark Alexander

18:46 PM, 4th July 2016
About 2 years ago

Reply to the comment left by "Asif Ahmed" at "04/07/2016 - 17:01":

Have a look at this https://buytoletconveyancing.co.uk/declaration-of-trust/

The firm is regulated by The Law society and fully insured to give professional advice.

Note the words "Some claims will be acceptable, others will not." in the text you have copied and pasted.
.

AA

19:41 PM, 4th July 2016
About 2 years ago

Hi Mark
Thanks for your direction. The ambiguity that HMRC leave is my case and point.
The issue that I would have is basis the maths that would follow.
Simple example -
A 40% tax payer B 20%
A has interest cost £100.
Rent is £200
A assigns 50% of income to B.
HMRC now receives £20 from B and not £40 from A.
Equity and Income maybe transferable but a percentage of the loan when the loan is clearly in the name of A ?
The advice that I had from a different solicitor was that he was aware of ' declaration of trusts' however it was a very grey area re their efficacy.


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