Deed of trust 100/0%, Private Residence Relief and Letting Relief

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    Deed of trust 100/0%, Private Residence Relief and Letting Relief

    Hello,

    This started out as a simple question, however on investigation there are implications I had not considered.
    I do hope you can provide some guidance and appreciate professional services are a must.
    But as a prelude to consulting a solicitor/accountant I would like to work through my thinking with you all.

    First my situation,
    Wife and I are joint tenants for a property we currently let. Two years ago the property was our principle residence for the preceding 12 years and since then has a BTL mortgage in both names.
    Rental income is equal to 15K per year before expenses.
    Wife does not work and has no use of her income tax allowance, I work and pay 40%.
    Considering I trust her with my life and assets and see no issue with changing the beneficial owner for income in the property so she can take advance of her income tax allowance.

    Objective: Maintain legal ownership between us - Wife and I remain registered owners with Land Registry and distribute the income such that it is all or as near as, received by wife for income tax purposes.

    Am I missing a step....?

    Change Beneficial Ownership in favour of wife - Requires the following?

    1) Solicitor to create a Deed of Trust - Share proportions to be decided? - 100/0% or 99/1% subject to answers to questions below.

    2) Change from Joint Tenants to Tenants in Common - Apply for a Form A Restriction (Submit SEV Form to Land Registry)

    3) Declare Beneficial interest in property and income to HMRC (Submit Form 17 to HMRC)


    Questions:

    A) Does Form 17 declaration to HMRC need to specify and match the proportional shares defined in the DOT?

    B) Can I split the share 100/0% and have both names registered as tenants in common?

    C) If we specify a 100/0% DOT split and declare this to HMRC, what of the following:

    D) Implication for mortgage provider, current mortgage and future re-mortgage in BOTH names (as now tenants in common)

    E) Private Residence Relief - If we come to sell, I will no longer have any beneficial interest in the property, will the chargeable gain still exclude the time for which my wife (and possibility myself?) lived in the property and the following 18 months?

    F) Letting Relief - Would any subsequent chargeable gain still qualify for lettings relief?

    G) CGT - Only my wife will be able to use her GCT allowance on the remaining gain?


    Thanks in advanced for the wisdom and wit I prepare to receive!

    Meta

    #2
    A) Yes, that's what it's for.
    B) No, the person with a 0% "share" would own nothing. You'd want 99:1
    D) You'd need to ask the mortgage lender, if the mortgage is a join mortgage they will possibly be OK, as you're both on the hook for everything. Some might, but you'll almost certainly find that their terms and conditions don't allow you to change the beneficial ownership without their permission, and other posters have been told no.
    E) The PRR will be reduced, as your half of the allowance will be lost. However, some time before you came to sell you would change the deed of trust to restore your "share".
    F) As E
    G) Yes, but note the answer to E.

    Steps one and two are backwards, you need the ownership split to allocate shares.
    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
      Thanks jpkeates.

      So 99/1% and permission from lender is the way forward.
      I've been quoted 350+vat for the DOT.

      Is this reasonable and are there cheaper alternatives?

      Meta

      Comment


        #4
        The cost will vary depending where you are located and how complex the process is.

        I'd probably pay that if I trusted the solicitor (and don't forget it's probably an allowable business expense).
        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


          #5
          Originally posted by Metanet View Post
          I've been quoted 350+vat for the DOT.
          That's what we paid recently. We were also quoted a lot more from other solicitors.

          Comment


            #6
            Our deed of trust was part of the conveyancing costs which came to the same fixed price agreed, before I told them we needed a deed of trust about a week into starting the purchase. It's 2 pages of generic legal speak, which they have on the shelf, just change the names so £350 sounds expensive.

            If it includes step 2, (which is actually the new step 1) then it would make more sense, as they are actually doing something which probably will take 30 mins of effort.

            Comment


              #7
              What you are charged in a solicitor's bill is not just for the solicitor's time spent on the job, but has to cover the disbursements including office rent and rates, receptionist , solicitor's secretary , the firm's book- keeping staff , lavatory cleaner and senior partner's motor car.

              Comment

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