Transfer of responsibility for/rental income from rental property to my brother.

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    Transfer of responsibility for/rental income from rental property to my brother.

    Hello everyone..

    I'm wondering if anyone has any knowledge or similar experience of my situation.

    I am an ex-pat the owner of a (unmortgaged) property in the UK – I am based in the EU, and let out the property via a local letting agent. I would like to (officially) hand the day to day running of the property (including the rental income) to my brother as he could use the money more than me right now.

    I am unsure as to the best method of achieving this without incurring large expenses concerning Capital Gains Tax and SDLT.

    A deed of trust would allow me to transfer the beneficial ownership of the property, but from my research it looks like this would mean I incur capital gains tax.

    Would a small transfer of equity (say 10%) get around these issues?

    Basically the property is already left to my brother in my will, and unless I find myself in a position in some years to come where I need the proceeds of the sale of the house for an emergency, to all intents and purposes, I would like my brother to have the house now. I just need some ‘insurance’ that the property cannot be sold without my permission.

    I would appreciate any advice as to the best way of achieving this?


    thanks,


    Daved.

    #2
    Assuming you still have a CGT allowance as a nonresident, if the gain on the portion transferred is below £12,300 no CGT will be payable (provided you don't have any other gain in the tax year).
    So you could transfer it into a trust a bit at a time.

    Income (and expenses) could be apportioned by the ownership share.
    And you could repeat the process annually.
    There would be annual conveyancing costs.

    You could put a charge on the property to make sure it isn't sold without permission.
    Alternatively, you can simply register the title with the Land Registry so that anyone buying the property has to make additional checks on the identity of the seller.
    If you're letting a property you should do that anyway as a matter of routine.
    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


      #3
      Non -residents selling UK property pay tax on the capital gain calculated from market value from 6th April 2015 ( commencement date for non-residents to pay cgt.) Did you acquire the property before April 2015 ?

      If the 12 months rental income less letting expenses is below the personal allowance, then you probably pay no tax on the rental profit..

      Nothing to stop you gifting the surplus rent money to your brother.

      Comment


        #4
        Thanks all for the comments.

        I have owned the property for over 25 years, and I was aware that as a non-resident only gains after April 2015 would count towards CGT.

        I'm not sure how I would be able to prove the value of the property at that time as I haven't had the property valued for many years.

        Re: gifting the surplus rent money to my brother. This is not a solution as I have to declare my income from overseas in my tax return in my country of residence. This income is not taxed, but is used to calculate any benefits i am entitled to should i lose my job etc here.

        The main goal of this is for my brother to legally have the beneficial income from the rent. He would pay tax on it, and I would no longer have to declare it in my home country.

        BTW the current market value of the property currently is around 160k.

        Would an equity transfer of 10% (which would be under the capital gains tax allowance) , PLUS a Declaration of Trust stating an unequal share of rental income = 100% in my brothers favour be a workable solution?

        Or would the the HMRC see this as a complete transfer of 100% of the beneficial ownership of the property and therefore I would be liable for the CGT on the whole value.

        I am also assuming no SDLT for my brother as the transfer would be a gift without consideration.

        thanks,

        Daved.

        Comment


          #5
          Once you own as tenants in common, you shouldn't need a declaration of trust, he's your brother, not your spouse.
          You simply need to advise HMRC of the way that you plan to split the income and costs of your (now) joint enterprise.

          There would be no SDLT currently unless your brother already owns another property, as there is currently an SDLT holiday due to Covid.
          The gift without consideration is, again, a married couple thing.
          For SDLT purposes, the gift is a transaction at market value (of the portion being gifted).
          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


            #6
            thanks for the comment..

            So I could use a "transfer of part of registered title" to transfer 10% of the equity. How it the split officially recorded?

            Assuming a 10% transfer of £160,000 property.

            £16,000 would be under the limit for both SDLT for my brother (who owns another property) and under the CGT limit for me.

            How would we advise the HMRC of the different split in rental income? wouldn’t they need a Deed of Trust as a proof of a legal arrangement?


            thanks,


            Daved.

            Comment


              #7
              You would use a conveyancing solicitor to prepare the gift document of 10% interest to brother and register the charge to joint names at Land Registry.

              After the registration at Land Registry is completed and also with freeholder of the flats , You send a letter to Tax Office to inform that both of you ( A & B) are joint owners of a BTL property at ( address ) and that you have agreed to distribute the rental profit A -0% and B-100%. ,

              Comment

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