beneficial interest to wife + her tax

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  • miyo360
    started a topic beneficial interest to wife + her tax

    beneficial interest to wife + her tax

    Hello,

    I am the sole owner of a property, which is mortgaged. As a higher-rate tax payer I wish to transfer the beneficial interest of this to my wife, who is currently unemployed (full time mum). This will take effect from April 6th 2019.

    Beneficial Interest
    Do I need an accountant to setup the beneficial interest? or is there a template form available online somewhere? What needs to happen to this form when completed? lodged with HRMC? or just kept by us?

    Her Tax
    Her rental income for 2019/2020 will be below the £12,500 amount for that year, so will she need to register for self-assessment?

    Thanks in advance.

  • Gordon999
    replied
    Here is the hmrc website on sdlt for interspouse transfers :

    https://www.gov.uk/guidance/sdlt-tra...nd-or-property

    show your tax accountant example 2.

    ( just realised its the same as quoted by jkp. )

    Leave a comment:


  • jpkeates
    replied
    To be entirely honest I think she's not communicating clearly rather than being wrong.
    The chargeable consideration, in this case, is the mortgage as far as I can see - unless your accountant knows something about the transaction we don't.

    I've not got a good link (it's been such a long time since I had to think about it, it's like someone querying 2 plus 2 being 4).
    https://www.gov.uk/guidance/sdlt-tra...nd-or-property is essentially the situation, but this document assumes that the transfer is happening as a result of getting married rather than after that happy event, but the principle is the same.

    Leave a comment:


  • miyo360
    replied
    Originally posted by jpkeates View Post
    If you are married, the consideration is the mortgage debt being acquired, which is half the outstanding amount if it's a joint mortgage.
    It's the full value for a non-married couple.
    Thanks jpkeates. Your advice matches that of both solictors I have asked. However, I have just relayed this to a tax accountant who insists it is the exact opposite. I quote her "bear in mind with a spouse you are transferring the chargeable consideration - its only with other transfers that just the mortgage is relevant!"

    Do you have a link to a government/official website that I can go back to her with?

    Leave a comment:


  • jpkeates
    replied
    If you are married, the consideration is the mortgage debt being acquired, which is half the outstanding amount if it's a joint mortgage.
    It's the full value for a non-married couple.

    Leave a comment:


  • Kape65
    replied
    According to HMRC website the consideration would be half of the mortgage debt.

    Leave a comment:


  • miyo360
    replied
    I then spoke to a different solicitor. He said I should speak to an accountant, but he believes that my wife would need to pay SDLT in our case.

    House value: 300K
    Mortgage: 160K

    He said the chargable 'consideration' regarding SDLT would be half the mortgage, or £80K, so SDLT would be 3% of this or £2,400.

    However, another accountant I spoke to said the 'consideration' is the overall value of the property, not the mortgage.

    This is major difference! I can't believe that two qualified and chartered professionals are giving such different advice. Who is correct?

    Leave a comment:


  • miyo360
    replied
    Originally posted by Doobee View Post
    I am in the exact same position as you and I’m currently setting up a deed of trust with a solicitor who has confirmed that my wife does not need to be named on the mortgage/title deeds/land registry in any way.
    This is what my solicitor friend also told me, see post #6.

    Leave a comment:


  • miyo360
    replied
    Originally posted by Little Rabbit View Post
    miyo360, I am curious, but did the technician mention HMRC's own guidance at TSEM9520 (of their Trusts, Settlements and Estates Manual):

    https://www.gov.uk/hmrc-internal-man...anual/tsem9520

    Assuming that guidance is still current, I don't understand how it squares with what the technician told you.
    Hello, apologies for the radio silence on this. I'm still getting advice from different people; solicitors, tax technicians, accountants. Each person I speak to seems to have a different opinion!

    In answer to the question above, no, the technician did not reference any specific guidance.

    Leave a comment:


  • Kape65
    replied
    Originally posted by Doobee View Post
    I am in the exact same position as you and I’m currently setting up a deed of trust with a solicitor who has confirmed that my wife does not need to be named on the mortgage/title deeds/land registry in any way.
    I believe that ownership can be inferred (if that's the right word) if you were married when you purchased the property. I would think notifying the mortgage company was essential though.

    Leave a comment:


  • jpkeates
    replied
    Has your solicitor checked the mortgage terms and conditions because the requirement to request permission from / notify the lender isn't statutory, if it exists at all, it's part of the terms and conditions of the mortgage?

    Leave a comment:


  • Doobee
    replied
    I am in the exact same position as you and I’m currently setting up a deed of trust with a solicitor who has confirmed that my wife does not need to be named on the mortgage/title deeds/land registry in any way.

    Leave a comment:


  • Little Rabbit
    replied
    miyo360, I am curious, but did the technician mention HMRC's own guidance at TSEM9520 (of their Trusts, Settlements and Estates Manual):

    https://www.gov.uk/hmrc-internal-man...anual/tsem9520

    Assuming that guidance is still current, I don't understand how it squares with what the technician told you.

    Leave a comment:


  • jpkeates
    replied
    You can transfer a very small percentage of the actual ownership to your wife to establish joint ownership (as tenants in common) and then use a trust to vary the ownership to the proportions that you want.
    That avoids SDLT on the sale.

    While that link indicates otherwise, it's at odds with everyone else!
    It would be great if it was true - maybe you should get them to draw up the documentation!

    I would query the response from the lender - because it depends on the question that they were asked.
    They probably won't have an issue with a trust and change of beneficial ownership (although they might, and, probably, should).
    But they are more likely to have an issue with a change of ownership title (which is a necessary component of the trust), because the lending is secured on the value of the property and you are about to reduce the value of their security.
    Most times they would insist on the spouse joining the mortgage (which may not be possible if they are not earning enough to qualify), although, if the loan value is much less than the property value, they may agree.

    Getting any non standard decision is difficult from most lenders.
    The lender will have a charge on the property title and will be aware of any change in title because they'll have to consent.

    Leave a comment:


  • miyo360
    replied
    So, I just called HMRC and their call handler asked a 'technician' my question. They came back and said a transfer of ownership is likely - but I would need to speak to a solicitor to be sure. She went on to say its a legal question, not a tax question.

    I queried this further and was eventually transferred to this technician. She confirmed (so, now seemed much more sure than before) that some transfer of ownership is required. She said if a property is 100% owned by one person, HRMC will "see" the beneficial interest as being received 100% to that person.

    I'll go back and query this with my lawyer friend and report back here...

    Leave a comment:

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