Help with Deed of Trust keeping tax man happy with the finance and Deposits

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    #16
    Originally posted by Kape65 View Post
    If I worked for HMRC I would question how someone could TRULY have a 100% beneficial ownership of a property that isn't reflected on the title deeds. I'm not saying this can't be done and in some cases such as trusts etc I can see the need to do it but in a situation where joint spouses are named on the title deeds yet one is saying that the other is the 100% owner just smacks of tax evasion. How can you suggest that your wife is 100% beneficial owner when you are purchasing jointly with a mortgage? As I said, I know it can be done just get the deed of trust and form 17 and you're rocking but if HMRC ever start paying attention to this form of tax evasion then a lot of people will be stung.
    I was never on the title deeds of one property but I was beneficial owner 100%. Had a DOT drawn up to that effect and subsequently declared 100% income etc etc. It does happen. Its not Tax Evasion or Tax Avoidance either.

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      #17
      Originally posted by Claymore View Post

      I was never on the title deeds of one property but I was beneficial owner 100%. Had a DOT drawn up to that effect and subsequently declared 100% income etc etc. It does happen. Its not Tax Evasion or Tax Avoidance either.
      Interesting. Would you elaborate as to how and why? In the OP's case it is clearly tax avoidance and if I were to do it myself it would be tax avoidance. I agree with jpkeates that it is not evasion.

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        #18
        If it reduces tax and isn't evasion, it pretty much has to be avoidance.

        I suspect a moral judgement was being made here, and therefore there is no formal definition of where the boundary between normal tax and avoidance occurs. The other judgement here is as to what HMRC might want to legislate against in future, and what they might see as indicating a mindset that would also lead to evasion.

        I'm not guaranteeing that it isn't evasion, as HMRC do seem to have powers to look at the intent of related transactions, and treat them as though they had been a single transaction, if they were only separated for tax reasons.

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          #19
          Tax avoidance isn't criminal but does have a bit of a moral "stink" to it.

          And this isn't really anything other than completely normal and fair, so perhaps even calling it tax avoidance is a bit strong.
          Playing by the rules might be more reasonable.

          A declaration of trust for a married couple is 100% OK and there'd be uproar if HMRC tried to change it (never mind backdate a change).
          It would affect lots of MPs for a start!

          You're even allowed to change the split just before you sell to use both people's CGT allowance - and no one will bat an eyelid.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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            #20
            Nev M ,

            Ref : Your Last Question

            I think it may be better for deposit to come from wife's account. Not so much to satisfy the Tax Office but to satisfy the conveyancing solicitor when your wife comes to sell. The conveyancing solicitor may ask the seller about the source of funds for purchase.

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              #21
              I think I was confusing this thread with the person who wanted to reduce the mortgage temporarily, just to avoid SDLT.

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                #22
                Originally posted by Kape65 View Post

                Interesting. Would you elaborate as to how and why? In the OP's case it is clearly tax avoidance and if I were to do it myself it would be tax avoidance. I agree with jpkeates that it is not evasion.
                Sorry, missed this post.

                My name wasn't on the Mortgage or Title deeds because I wasn't working at the time. I financed the whole property etc. DOT put in place to protect my investment and I declared all the income and paid taxes etc. I understand, had the mortgage provider known about the DOT, they might not have been happy. Looking back with hindsight, I am so glad the DOT was in place.

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                  #23
                  Some very interesting and views on this from both ends of the spectrum. Also, legally I am not getting much of a clearer answer to be honest. I think the safest bet at this point is 99% to 1% as majority here are for familiar with this including my agent.

                  For the record I am doing the deed of trust clearly to avoid tax (not evade it) because I am a 40% taxpayer and my wife as a 20% taxpayer will pay less. Our combine wages for a couple if shared equally would put us both firmly in 20% tax bracket, alas we can't share the tax codes between us.
                  If purchased and paying 40% tax then it would force the profit too low to be viable long term investment.

                  There seemed to be a legally way to do this through the DOT and form 17 but as many here have also commented on too, I also worry about what the position would be later if the tax office decided to look at it and say I had very clearly bought the property with our join savings and adjusted the deed of trust for tax reasons. They could also view the land registry and say that shows also 50/50. I would just have to put my hands up and say yes that’s exactly what I did. Much in the same way I would pay enough to my Pension to come below the 40% tax threshold to avoid tax.

                  When i called the Tax office they went away to check and called me back and clearly said its fine just fill in the forms with the DOT attached but who knows what they may say later as I also can see the argument that can be used to say I was avoiding tax using this form.

                  I mentioned to the conveyancer also that I wanted a deed of trust on completion and they said its fine they will just register it with the land registry as this also when we buy the house and then this gave me pause for thought too as was unsure if that would cause issues as well. My understanding was the land registry could remain 50/50 and the DOT can still be valid at 99/1% for the tax office of the beneficial interest.

                  Eventually I asked the conveyancer to just do Land Registery as normal 50/50 split and the days after completion we would just do a deed of trust 99/1%. Unsure here also if I am right or wrong. The deal is not yet done so I can still change my mind, but we are at mortgage accepted and surveys done, and only searches left to do.

                  Gordon999. I can transfer the monies from our saving and join accounts to my wife’s personal account but of course if the money trail is followed it will show coming from both of us also. In reality the money going into buying it is from my earnings but personally I see this our money as we are married.

                  Ref the mortgage company I will be on it and liable what ever happens as i have signed a contract jointly to be so regardless of other arrangement I would assume.

                  Am being a bit silly here and maybe should do this as a limited company. Was trying to avoid the set up and accountancy fees and load managing as a company maybe is a better option? Not sure the mortgage company offer that option I am with though, will have to check.

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                    #24
                    Using a deed of trust and form 17 notification to HMRC are routine and HMRC are completely OK about these arrangements.

                    They're almost always used where one spouse is a higher rate tax payer and the other isn't.
                    That's the point.
                    They're completely legal, legitimate and not at all controversial.

                    The only people who might have an issue is your mortgage lender (but probably not).
                    They would have a much bigger issue if you try and switch to limited company ownership.
                    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

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                      #25
                      Thanks JP, that sets my mind at rest a little more. Much Appreciated!

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                        #26
                        No solicitor wouldn't create a deed of trust to enable tax evasion (the fees they get aren't high enough to risk being disbarred!)
                        When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
                        Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

                        Comment

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