Transfer of beneficial ownership from spouse – No mortgage?

by Readers Question

11:02 AM, 5th June 2017
About A year ago

Transfer of beneficial ownership from spouse – No mortgage?

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Transfer of beneficial ownership from spouse – No mortgage?

My wife is a basic rate tax payer and solely owns one property (with no mortgage) which she rents out. I also solely own one property (again with no mortgage) which I rent out. Annual rentals are around £6,000 per property. I currently have no other income apart from the rent of £6,000 from my property.

We are considering using a Declaration of Trust to transfer, say, 99% of the beneficial ownership of my wife’s property to me. This would allow me to fully utilise my annual personal tax allowance of £11,500, saving my wife tax at the rate of 20%.

Does this sound like a sensible option and are there any other considerations that we should be aware of? My understanding is that there would be no stamp duty or CGT on the transfer of the beneficial ownership from my wife. Also, I understand that we do not need to inform the land registry.

Would we be allowed to transfer 100% of the beneficial ownership, or would my wife need to retain at least 1%?

Many thanks
Mark



Comments

Neil Patterson

12:47 PM, 5th June 2017
About A year ago

Hi Mark

Yes, you are correct, there is no CGT on transfers between spouses.

As there is no mortgage, and hence no consideration, and provided the transfer is dealt with as a gift, there is no SDLT.

We can deal with the paperwork and process for you if you wish at a cost of £250 plus Vat per Declaration of Trust. You can email me on npatterson@property118.com

Mark Alexander

13:04 PM, 5th June 2017
About A year ago

Reply to the comment left by "Neil Patterson" at "05/06/2017 - 12:47":

You beat me to it Neil.

I concur with your response.
.

Mark Smith

14:33 PM, 5th June 2017
About A year ago

Thank you both for your responses.

I know that where a property is jointly legally owned, Form 17 has to be submitted to HMRC, along with a copy of the Declaration of Trust. But in this case where there is sole legal ownership, if we go ahead with the transfer of 99% of the beneficial ownership, would we need to inform HMRC straight away after the Declaration of Trust becomes effective? Or would HMRC only need to be informed when our tax returns are submitted after the end of the current tax year?

In addition, if the property were to be sold in the future, would the CGT liability be different as a result of the transfer of the beneficial ownership? Although we do not have any plans to sell the property in the short term, we would like to be aware of any potential adverse consequences before proceeding with the transfer of beneficial ownership.

Many thanks
Mark

Mark Alexander

14:51 PM, 5th June 2017
About A year ago

Reply to the comment left by "Mark Smith" at "05/06/2017 - 14:33":

Hi Mark

It get's very confusing when the person we are responding to is called Mark smith and so is the Barrister we recommend. Never mind, hopefully this will clear up any confusion for people following this thread.

In answer to your questions, Form 17 is only applicable is the legal ownership of the property is already joint. There is no other notification required, save for completing your tax returns and being able to provide a copy of the Declaration of trust to HMRC if required, much like receipts for purchases or mortgage interest claimed etc.

CGT is based on beneficial ownership. Therefore, prior to selling the property, you might consider changing the beneficial ownership to 50;50 in order to be in a position to utilise both of your CGT annual exemption allowances.
.


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