Buy to Let income - tenants in Common tax advantage query

[THEPUMA]

Your solicitor should be able to do a declaration of trust to split the income arising from the asset, and capital into different percentages.

Then fill in HMRC form 17.

That form would not apply in the circumstances you describe. It can be used to enable you to be taxed on actual ownership proportions but not to enable you to be taxed 99:1 when you own the property 50:50.

[Maslins]

That form would not apply in the circumstances you describe. It can be used to enable you to be taxed on actual ownership proportions but not to enable you to be taxed 99:1 when you own the property 50:50.

Agreed, but the property has not yet been purchased, therefore it does not need to be acquired 50:50.

[THEPUMA]

Agreed, but the property has not yet been purchased, therefore it does not need to be acquired 50:50.

I agree but that is not what you originally suggested.

Many people do what you suggest. No reason why you can't make it 99:1. You can also do this whilst still retaining a 50:50 split for CGT purposes (thus both gaining your ~£10k annual exemption).

[Maslins]

I agree but that is not what you originally suggested.

The declaration of trust can be setup to effectively split income and gains differently. The form 17 must agree to the income split, which is what is intended. The gains split can be 50:50 without the income split also needing to be that way.

[THEPUMA]

The declaration of trust can be setup to effectively split income and gains differently. The form 17 must agree to the income split, which is what is intended. The gains split can be 50:50 without the income split also needing to be that way.

I disagree.

By default the income arising from property held jointly by husband and wife is split 50:50 for tax purposes.

If the property is held unequally and the husband and wife wish it to be taxed based upon actual ownership, they can use form 17 to apply for this to be the case.

Form 17 does not apply in any other circumstances. Therefore, in no other circumstances can the income be taxed other than 50:50.

[Maslins]

By default the income arising from property held jointly by husband and wife is split 50:50 for tax purposes.

As joint tenants yes, but doesn't have to be 50:50 if tenants in common as suggested in the OP.

If the property is held unequally and the husband and wife wish it to be taxed based upon actual ownership, they can use form 17 to apply for this to be the case.

This is what I am saying, with the added element that the deed of trust can effectively make it so "actual ownership" is different for income and for gains.

[THEPUMA]

As joint tenants yes, but doesn't have to be 50:50 if tenants in common as suggested in the OP.



This is what I am saying, with the added element that the deed of trust can effectively make it so "actual ownership" is different for income and for gains.

OK I see your point. I am checking with one of our techies but preparing to eat humble pie.

[Maslins]

OK I see your point. I am checking with one of our techies but preparing to eat humble pie.

The personal tax dept of the firm I used to work for did this type of thing fairly regularly. I was in the corporate tax dept so I'm probably not spot on with my terminology as I never needed to be, but I am certain what the OP wants to achieve can be done.

[ASB]

The personal tax dept of the firm I used to work for did this type of thing fairly regularly. I was in the corporate tax dept so I'm probably not spot on with my terminology as I never needed to be, but I am certain what the OP wants to achieve can be done.

Bugger! Think I could have saved myself a couple of grand. Ah well. In my case I was sole owner of the property - for various technical reasons related to the mortgage, so I gifted half of it to my wife and split the income 50/50 as per "usual practice". I wanted her to have 100% of the income (not a great deal) because I was a 40% tax payer and she wasn't. Now if only I could get in my BN66 powered time machine and retropsectively make the declaration....

[illfittin]

thanks guys, particularly Maslin and the HMRC link, much appreciated.