Property Ownership and Tax

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    Property Ownership and Tax

    Hi,

    I am in the process of purchasing my first development property and would like some general advise to keep me on the straight and narrow when the tax man comes knocking. My intention is to property trade, my wife is currently not working and I would like to take advantage of her tax allowance should we make any profits. I was wondering if the following was possible:

    Me becoming the legal owner and my wife becoming beneficial owner via declaration/deed of trust. If this is possible ? Am I correct in assuming that any profit made from the sale of the property would be classed as my wife’s income and thus allowing her to use her tax allowance ?

    If the above is correct, at what time would I need to draft the declaration/deed and what wording should it include ?

    Is there anything else i need to consider ?

    Any response is greatly appreciated.

    #2
    Have you considered a limited company for property development?

    Your wife, if a shareholder, could receive dividends, and/or paid a salary.

    Comment


      #3
      As this is the first property we are developing, we will just stick her being self employed. Once we do a few more, we will consider a Ltd Co.

      Comment


        #4
        I would suggest your plan is more tax evasion than tax avoidance.

        In the case of property ownership, the income is taxed on the beneficial owner as property income which is derived by the use of the asset. The tax is therefore on the beneficial owner of the asset.

        For property development, the tax is on the individual creating the value, hence it is self employment income and not property income. Since your wife would not seemingly be doing the work, but you just arbitrarily allocating the profits, it would seem that you are taking a risk that the setup is more evasion than avoidance.

        Within the structure of a Company you may seek to distribute distributable profits in whatever fashion you like via the share structure as the property trading profits are at least correctly being taxed under Corporation Tax rules.
        I can take no responsibility for the use of any free comments given, any actions taken are the sole decision of the individual in question after consideration of my free comments.

        That also means I cannot share in any profits from any decisions made!

        Comment


          #5
          My wife will be creating the value, as she will be appointing the builders, trades, etc and project managing the process. I am simply the legal owner as the mortgage will be in my name. She is currently not in employment due to looking after the kids, her return to work was hindered by inflexible working hours so she has decided to refurb properties. Due to no income she can't apply for a mortgage. I read on HMRC's website that person A can be the legal owner and person B the beneficial owner via a valid Declaration of Trust.

          Comment


            #6
            Originally posted by NavSG View Post
            My wife will be creating the value, as she will be appointing the builders, trades, etc and project managing the process. I am simply the legal owner as the mortgage will be in my name. She is currently not in employment due to looking after the kids, her return to work was hindered by inflexible working hours so she has decided to refurb properties. Due to no income she can't apply for a mortgage. I read on HMRC's website that person A can be the legal owner and person B the beneficial owner via a valid Declaration of Trust.

            This is an interesting post. Is there any more information that will back NavSG intentions? To me this sounds totally plausible and not tax evasion, just simply making better use of tax options available.

            Comment


              #7
              Yes this can be done. Be carefull about the the % of Beneficial Interest and your mortgage interest. If you disposed of the property with 100% beneficial interest to your wife then you can not claim the mortgage fees and interest. You will have to adjust the DofT prior to any exchange of contract. Regards Peter

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