Changing from Joint Tenants to Tenants in Common for a Declaration of Trust

[jpkeates]

Can they do that with a 99% share of their" half"?

[Lawcruncher]

If

(a) you and your brother both wish to give your shares in the property to your respective wives so that they each hold half of the property as tenants-in-common; and

(b) you and your brother wish to continue to be the registered proprietors at the Land Registry,

then,

all that is required is for each of you to assign by deed a half share in the property to his wife. There is no need to sever the joint tenancy as the assignments will effect severance. There is no need to make a declaration of trust as there is already a trust of land by virtue of you and your brother being joint owners.

[jpkeates]

No, I meant an actual company (a management company usually can't charge enough to make it worthwhile for tax before it stops being a credible arrangement.)

Anyway, I understand a bit more now, but I don't think I can see how you can do what you want - but then you have a proper tax advisor.

I can see that you would need to be tenants in common - as joint tenants you don't own 50% each, you both own all of the property. So to establish the 50:50 split

There are implications beyond tax to think about though - as tenants in common you would both own 50% of the property and each of you could will or sell the half without the other's consent. As joint tenants, if one of you dies, it automatically becomes the other's property, regardless of any will - tenants in common don't.

What I don't see working is your wives being "beneficial recipients" of income for any useful tax purpose, without being landlords or without setting up a formal trust (or partnership or company).
They are already beneficial recipients of the income, they're just not taxed on it.

But to be able to pay income tax on it, they have to receive it as income (not indirectly as now), so I think - in the absence of any other formal structure - they would have to be paid some of the rent, and to do that they need to be one of the landlords.

Then you can vary the proportion they receive with a deed and form17. I've never seen it done between two married couples, but from the sound of it your tax guy knows its possible.

The deed of trust your advisor is proposing doesn't complete a return.

As an aside, you would want to assign the income 99:1 (or whatever the right numbers are), not 100:0, as, otherwise, you are no longer a joint owner.

[areynolds]

I assume you’re referring to setting up a management company? So paying our wives via a company?Yes we are married. Our partners would not become landlords, or even owners of the property, just beneficiaries of the rental income. The cost of setting up a DoT is minimal in comparison to tax efficiency that they offer, however my tax advisor has advised that a DoT does not need it’s own tax return, only the beneficiaries of the income need to file a return.

The initial question is more about how the property is held and if moving it from joint tenants to tenants in common is strictly necessary to make our wives beneficiaries of our equal share in the property i.e. I wish to make my wife a 100% beneficiary of my 50% in the property.

[jpkeates]

Are aware of another option other than a trust whereby a partner can receive income from property?

There are a number of options (and a trust may be the best solution).
The four of you can set up a partnership (or even an actual company) to let the property for example.

Are either of you married to your partner?

There's no need for a landlord to own the property they let out, so there's nothing I can think of stopping you four being joint landlords without changing the ownership.

Tax follows beneficial ownership, so if all four of you ultimately receive the income in reality, it should be possible for you to all be landlords and simply split the income and costs in four.

The problem with trusts (which can be used to do what you want) is that there's a cost in setting them up which can offset quite a lot of tax savings and they need an annual tax return of their own, separate to your own.
Your partners would also need to report the revenue to HMRC which may mean new Self Assessment returns for them.
Unless you enjoy completing tax returns it can be more trouble than it's worth.

I think I can understand the conflicting advice.
The most common use of a trust and form 17 in this context would be for a married couple to vary the ownership percentage between them, which does require ownership as tenants in common (so there's an ownership split for the trust to vary). Form 17 simply notifies that to the revenue. But if you're not married to your partner, I think it's a red herring.

The mortgage thing is a bit odd - I don't really understand the point (and I don't think it's right or relevant).

[areynolds]

We wish to make them beneficiaries so that they can receive a % of the rental income. This yields a certain amount of tax efficiency seeing as they are informal beneficiaries already and would also be beneficiaries should an owner die via the owners will. Are aware of another option other than a trust whereby a partner can receive income from property?

[jpkeates]

My brother and I wish to make our partners beneficiaries of the property via a declaration of trust.

That's not really an answer to my question

Why do you want to do that - what benefit do you want to include / transfer and why?
Why are you so insistent on doing this via a trust - that's a solution not an aspiration?

[areynolds]

My brother and I wish to make our partners beneficiaries of the property via a declaration of trust.

[jpkeates]

What are you trying to achieve (not what do you think you need to do to achieve it)?

[areynolds]

Hello all,

I hope you're keeping safe and well during these strange times.

I'm looking for some advice in relation to changing from joint tenants to tenants in common. My brother and I currently hold a property that has no mortgage on it as joint tenants. We wish to put a declaration of trust in place to make our partners beneficiaries. I have received conflicting advice from professionals that I need to change from joint tenants to tenants in common between my brother and I before the DoT is put in place. I've also been told that because the property has no mortgage on it, we don't need to register the DoT with HMRC by way of the Form 17. Does this sound right to what you have experienced before?

Thanks for your input

Alex