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Foreign Property Income - % split between spouses

Foreign Property Income - % split between spouses

A new client of mine jointly owns a furnished property in Switzerland with her spouse. They let the property via a local commercial letting agent and declare the income on their UK tax returns on a 50/50 income split basis. I understand that under normal circumstances they can complete Form 17 to opt for the allocation to be other than 50/50 (eg 95/5). However, Form 17 specifically excludes Furnished holiday lets. My client is a 20% tax payer, unlike her husband who falls within the 40% bracket (excluding the property income), so it makes sense to allocate as much income to her as possible. The income from the let is small - approx £12,000 in total. Is there a different route to take to be able to split the income 95/5 (eg an equivalent Form 17)? If the income arises from offering the property and letting it for less than the 140/70 days required for a furnished holiday let, is the income then not considered to be classified as FHL and therefore Form 17 can be used?

Many thanks

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30th Dec 2012 09:01

Form 17

No - a quote from form 17: 

When to fill in this form

You can use this form to declare a beneficial interest if you hold property jointly and:

• you actually own the property in unequal shares

• you are entitled to the income arising in proportion to those shares ...

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30th Dec 2012 12:53

Split profits as agreed by parties

Jointly owned FHL properties fall outside the normal automatic 50:50 & form 17 rules, rather you merely split the profits according to how the parties agree, ie as if it were a trading partnership.  Have a look at this HMRC manual.

Use the SA help sheet for the FHL rules to decide the best route but, on balance, given the capital tax benefits it's usually better to go for FHL status if you can.

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By cgeens
08th Jan 2013 23:46

Profit Share

Many thanks for your very helpful comments.

The last part of the puzzle for me therefore is the practical aspect of how to deal with the profit split. Is it sufficient to include a one-liner on the Statement of Lettings Schedule showing the split which they both then review and sign as evidence of their agreement? I can't find a form to complete so I'm assuming HMRC doesn't need to be formally notified.

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By JAADAMS
09th Jan 2013 18:28

Correct -

IHMRC does not need to be notified but...  I would suggest that something should be written down - just in case there are any maritial 'problems'/ arguements or even HMRC queries in the future!

You can change the % each year if it is beneficial to do so - so your idea of a 'one liner' each year should be fine. 

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