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  • Tax

    Transfer beneficiary via declaration of trust

    I earn over the 45k threshold and have sole ownership of a flat which I have been renting out for some years. I have no mortgage on the flat and pay a hefty amount of tax on all this.

    My husband is currently unemployed and is the sole owner of the house that we live in. The mortgage is under his name.

    We do not know how much longer he will be unemployed for, but think we could save money by putting the flat under his name, not through a change in legal ownership, but in the beneficial ownership - through a declaration of trust. We understand that a barrister could set this up for us and HMRC doesn't requires Form 17 (100% beneficial ownership to my husband).

    Do you know how straight forward this is, and how quickly we could change things back to how they originally were if he finds a permanent job? We do no want to incur into other tax as capital gain or stamp duty.

    Any thoughts / advice on this, or better ideas on how

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    Hi Doir

    In order for your husband to be taxable in connection with the property you own he must be on the Deeds of the property. In order to get this changed I would recommend contacting a Solicitor.  The automatic presumption under UK tax law is that property owned by Spouses is shared 50:50 and in order to change this the property needs to be owned as Tenants in Common and you will need to complete a Deed of Trust changing the ownership ratio from 50:50 to whatever you want e.g. 90:10.  Having completed this you will then need to complete Form 17 and send it together with the Deed of Trust to HMRC within 60 days of completing the Deed - it is not possible to backdate this.  Once this is done the sharing of the property has changed for tax purposes until such time as a new Deed of Trust and Form 17 are completed.

    I would stress that changing the ownership using a Deed of Trust can only be done for property owned as Tenants In Common.  It is also important to note that whilst transfers between Spouses (or Civil Partners) are tax neutral for CGT purposes they can give rise to an SDLT charge where mortgages are involved.  I note that at present the property is unencumbered but should that change in the future then you must consider SDLT before rearranging the sharing of the property.

    Lastly I would also comment that in changing the ownership ratio by Deed of Trust and holding the property as Tenants in Common you should also make sure that appropriate provision is made in your Wills so that in the event of one of you dying the property is handled in the way you both want it to be. In addition to the issue of Wills you may also want to put Lasting Powers of Attorney in place so that should one of you be incapable of managing your own affairs for any reason then the other can take over control. 

    Regards Nigel

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    Hi Doir,

    It is possible for you to transfer a 100% beneficial interest in your rental property to your husband under a Declaration/Deed of Trust and with him having  100% this means there is no need to submit a form 17 to H M Revenue & Customs, since there will be no split in the income. However, I would recommend that you consult a solicitor rather than a barrister, as they do tend to be more expensive.

    For Capital Gains Tax purposes, the transfer would need to be reported on the relevant tax return, using the market value as the deemed proceeds. You would then claim spousal exemption on the whole of the resulting gain to reduce it to nil, so that no tax would be payable. The result of this is that your husband would receive the property at your base cost.

    For SDLT purposes, a transfer for no consideration, ie an outright gift,  is usually exempt, except where there is a mortgage in place, but as the property isn’t mortgaged there should be no problem, but please do check this with the solicitor.

    In the event of the property being sold and your wanting to benefit from your and your husband’s Capital Gains Tax annual allowance, another Declaration of Trust would need to drawn up so that your husband could transfer a share back to you. This too would be a disposal at market value for CGT purposes and I recommend that the transfer take place before the property is put up for sale to prevent H M Revenue & Customs challenging it under the anti avoidance provisions.

    I hope this reply is of some help to you but should you need further assistance please do not hesitate to contact us.

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk


    I'm in a similar situation myself, I want to transfer 100% to my partner for fax reasons and I have no mortgage. Anyone got any views on which of the above posts is best to follow? I'm feeling like every piece of advice I get is different. Thanks.

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