Deed of trust BTL sole ownership

Collapse
X
 
  • Filter
  • Time
  • Show
Clear All
new posts

    Deed of trust BTL sole ownership

    Hi all

    Need your assistance with the following.

    I have an investment property which is registered on the land registry under my name.
    The property has a btl mortgage in my name too.
    I wish to make my wife the beneficial owner of the rental income.
    I assume as I have sole ownership the property falls within tenants in common not joint tenants and therefore the 50:50 ruling does not apply.
    Due to the fact my wife is not on the mortgage and not registered on the land registery a form 17 is not required.
    Can you please confirm if a deed of trust is required stating my wife is the beneficiary of all future income?

    I would like to confirm we are doing this for tax efficiency not tax avoidance.

    Thanks

    #2
    You can't be tenants in common with sole ownership.
    Your mortgage lender is likely to decline to allow any change in beneficial ownership (or title) unless your wife is on the mortgage.

    HMRC are not likely to accept that your wife should be able to declare income from rent on a property that you own in its entirety.
    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
      Originally posted by Zombie View Post
      as I have sole ownership the property falls within tenants in common not joint tenants and therefore the 50:50 ruling does not apply.
      If you have sole ownership, your wife owns no part of it whatsoever. So she can't claim any income.

      Comment


        #4
        A deed of trust is not having any impact to the mortgage or the ownership just the allocation of income.

        Much like a property bought with a another

        Comment


          #5
          You will almost certainly find that the deed of trust requires the lenders permission.
          The trust creates a beneficial ownership in the property which reduces the lender's security considerably.
          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
            Zombie
            You will find that the income of the property would become due to the lender n the unfortunate event that a Receiver of Rent was appointed.
            I would suggest that you seek to have a transfer of equity with the consent of the lender put in place, however there could be an issue on SDLT in making such an arrangement so consult your solicitor to determine possible liabilities and then seek the inclusion of your wife onto the mortgage, as this is a BtL mortgage and assuming that she has a clean credit record there should not be an issue of obtaining approval.

            Comment


              #7
              Zombie,

              I think you have some misunderstanding about registration of property ownership .

              The legal ownership rules are :

              1. Property registered under one name means the named person is the legal owner of the property. So the legal owner is responsible for the tax return to hmrc.

              2. Property registered under 2 names ( husband and wife) as "joint tenants" means both own the property and if one joint owner dies, the legal ownership passes to surviving joint owner.

              3. Property registered under 2 or more names ( max 4 names ) as "tenants in common" which means each person owns a % share in the property (e.g 10% and 90%) . This specific share can be passed to others under a will .


              HMRC rule : For property held under husband and wife's name as "joint tenants" , hmrc assumes the rental income is shared 50 : 50 basis . But Form 17 is required to inform the Tax Office if the division of rental income is NOT shared equally between husband and wife.

              Comment


                #8
                Hi Zombie

                After googling this for months I'm excited to find your recent posting as I have exactly the same situation as you, except that we are not married and so we have to think about capital gains tax as well. If you own other properties in the background then the main problem is stamp duty, which is worked out based on the 'consideration', which is deemed to be 50% of the outstanding mortgage balance. In the old days this would have been zero for a mortgage under £250,000 as the rate was 0% below £125,000. However, under the new rules there is the 3% extra, which in this example is £3,750. If it wasn't for this it would just be a few hundred quid to do the transfer of equity to add your wife's name to the mortgage and land registry records.

                I have to say I've never quite understood why it's worked out that way. With no mortgage would there be no stamp duty at all, or stamp duty on half the value of the property? What about if the mortgage was just £1 (one pound)? Would it be 3% of 50p? Doesn't make logical sense to me.

                I haven't given up on this, and I am now trying to find a specialist who can offer proper advice on this, because the average conveyancer doesn't really understand the issues. And there are not many professionals who can cover off the legal AND the tax aspects, and importantly offer some kind of guarantee backed by professional indemnity insurance that they are right. My usual solicitor just added a statement to their quote along the lines of "we think stamp duty might be payable, you may want to check with an accountant". And that was with even a deed of trust arrangement rather than transfer of equity.

                MC

                Comment


                  #9
                  Originally posted by militantconsumer View Post
                  I have to say I've never quite understood why it's worked out that way. With no mortgage would there be no stamp duty at all, or stamp duty on half the value of the property? What about if the mortgage was just £1 (one pound)? Would it be 3% of 50p? Doesn't make logical sense to me.
                  Because if there's a mortgage you aren't giving the property to your partner, they're joining the mortgage and, basically, buying half of the property with that debt.

                  It's worth considering that the transaction is real - you are selling a percentage of property to your partner.
                  Married couples who's relationship ends have an arbitration process available to sort out a division of assets, cohabiting couples don't.
                  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


                    #10
                    Militantconsumer,

                    1. Solicitors are not allowed by the UK Law Society to give tax advice to clients. If you require tax advice from a professional , you have to approach a qualified accountant, specialising in taxation matters.

                    2. A mortgage-free property can be transferred to another person as a gift i.e for "no consideration" , and recipient will not be required to pay sdlt.

                    3. A property with attached mortgage means there is a loan outstanding , and the property transfer is treated as a sale because the recipient still has to pay off the outstanding mortgage. The consideration for "this transfer" is taken as the value of the mortgage loan . If the mortgage loan is below £40K, the "consideration for the transfer" should be below the threshold for start of sdlt and not be charged . ( but please check with Tax Office before you act .)

                    Comment


                      #11
                      Originally posted by Gordon999 View Post
                      Militantconsumer,

                      1. Solicitors are not allowed by the UK Law Society to give tax advice to clients. If you require tax advice from a professional , you have to approach a qualified accountant, specialising in taxation matters.
                      Don't be so absurd.

                      Comment


                        #12
                        I found a barrister who has said "this matter can be securely dealt with with no SDLT liability by sharing the beneficial interest 99-1 or even 100-0 whilst leaving the legal ownership unaffected."

                        I do not know yet exactly how this is achieved, but their fee is £400 per property, which is a drop in the ocean if it saves tax on an ongoing basis. With everyone else saying "can't be done" I will be following this up as it's the only plausible solution to the problem.

                        Comment


                          #13
                          Why bother coming on this forum then? I can tell you for a fact it can't be done - you are the only owner of the property. If what your barrister pal was saying was true, we could all just appoint non-taxpayers as nominal owners for tax purposes. Job done. HMRC won't see it that way, by that time your barrister will be long gone with your £400 per property.

                          My source? I am a Chartered Accountant. If you don't believe me, here is the fabled form 17 - it is this you need to use to declare beneficial ownership of property.

                          https://www.gov.uk/government/public...-and-income-17

                          It is entirely clear from the beginning that it is only for jointly held property.

                          Good luck - you'll need it.

                          Comment


                            #14
                            I am puzzled, because I had always understood that Form 17 could only be used to declare beneficial ownerships of property where the legal title was also jointly owned. In other words, Form 17 was used where say Party A and Party B were joint legal owners (as tenants in common) and also both had a beneficial interest (in whatever share, other than 50/50, they had agreed); but that Form 17 was not used where Party A was the sole legal owner and both Party A and Party B had a beneficial interest. Are you saying this is not correct?

                            Also, I wonder if militantconsumer's barrister is referring to a scenario where Party A is initially the sole legal and beneficial owner of a property, then makes a declaration of trust to the effect that Party B has become either the sole or shared owner of the beneficial interest in the property (without any change being made in Party A's registered legal ownership)? This seems to be the scenario envisaged in HMRC guidance TSEM9520 (link below), but it would be interesting to know if this is indeed what the barrister is getting at.

                            https://www.gov.uk/hmrc-internal-man...anual/tsem9520

                            Comment


                              #15
                              Yes, I think form 17 is a red herring. It is only for married couples anyway, and we are not married (although the OP is).

                              Thanks for the link to TSEM9520. I find it interesting that the recipient doesn't need to be aware of the declaration - I'm not sure how that would work in practice because surely they would be assessed on the rental income?

                              I will post more details on here once I have them. It's definitely important to us that registered legal ownership doesn't change, because this would surely make it more difficult or even impossible to re-mortgage in the future.

                              Comment

                              Latest Activity

                              Collapse

                              • Reply to Could we be more tax efficient!
                                by JK0
                                It's only if you have an agent running the place, the flat is assumed to be managed from there, so your trips to the agent are deemed to be you 'travelling to work'. (Sounds nonsense to me, but there we are.)

                                If there is no agent. or you are between lettings, I'd say you can claim mile...
                                13-12-2019, 12:10 PM
                              • Could we be more tax efficient!
                                by bobcat
                                Hi all,

                                We are currently completing the annual tax return for my wife and just wondering whether we could be more tax efficient! We no longer have any loans on the properties or major replacements planned so our tax payable is more than previous years. I don't mind paying tax but am wondering...
                                09-12-2019, 17:40 PM
                              • Reply to Could we be more tax efficient!
                                by jpkeates
                                An employer can pay an employee £4 a week without it being taxable to cover the additional costs if the employee works from home.

                                So I make the claim on the same basis and have done for years.
                                No one's ever queried it.
                                It's not consistent with the HMRC advice for small businesses,...
                                13-12-2019, 10:55 AM
                              • Reply to Could we be more tax efficient!
                                by bobcat
                                Hi everyone, thanks for all the advice and apologise for the delay in responding.

                                I think of all the possible things mentioned the only things I don't claim for at the moment are mileage, home office and apportioning a phone bill so will look at those in more detail.

                                In terms...
                                13-12-2019, 09:53 AM
                              • Reply to Responses from HMRC
                                by Gordon999
                                You can call the tax office hotline , quote your tax reference and ask if your recent letter / form R17 has been entered under your file ?...
                                12-12-2019, 22:56 PM
                              • Responses from HMRC
                                by AndrewDod
                                Is anyone getting any responses from HMRC these days at all. I sent then two R17 forms with certificates of postage -- one a year ago, another a month ago. No response or acknowledgement at all....
                                11-12-2019, 17:51 PM
                              • Reply to CGT Online Tax Return Question
                                by Gordon999
                                For calculation of capital gain after sale, the gain (= "sale proceeds" minus "acquisition costs" ) and you want to include the cost of 6 additional buildings and not kept the receipts, you still show the calculation in the tax return but you declare the acquisition cost is based...
                                12-12-2019, 22:50 PM
                              • CGT Online Tax Return Question
                                by Tricky19
                                I have a couple of questions relating to my online self-assessment for the CGT calculation on a rental property i have sold.

                                I originally lived in the property as my primary residence and had some improvement works done which added to the value of the property. I will be deducting these...
                                06-12-2019, 14:53 PM
                              • Reply to Responses from HMRC
                                by tatemono
                                my wife and I filed paper returns in August and received our tax statements on the same day in November. Hoping not to hear from them again for a while ;-)
                                12-12-2019, 21:46 PM
                              • Existing property and existing Ltd Co - Tax question
                                by Iceboy74
                                Hi All,

                                I have a LTD co, via which I have been doing consulting for 12 years. About a year a go I asked my accountant to change the SIC codes to include property development, rental etc.

                                I have just refurbished a house and the Estate Agent has asked me if I want the agreement...
                                10-12-2019, 11:39 AM
                              Working...
                              X