Husband and Wife own a rental property as joint tenants.
Wifes income is currently in higher tax band and expected to continue this way.
If they decide to hold the property in unequal shares must they sever the joint tenancy.
I understood that the form 17 needed to be sent to HMRC did not apply to joint tenants.
Or is this incorrect and they simply need a declaration of trust and can submit a form 17 without severing?
Thanks for any comments
Replies (6)
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It is the same as anything
you want to do. As long as the paperwork and the reality is the same then there is no problem. If the rental income goes into a joint account (which would be the most obvious) then the income is deemed 50/50 split and rightly so. If you are splitting the income purely for tax reasons (good tax planning/avoidance) then the income has to go into the respective bank accounts and declared on SA returns. HMRC will challenge, that's why it has to be set up and adhered to and not just a paper exercise.
Separate banks accounts
Are not necessary as the settlements legislation does not apply where there is an outright gift to a spouse (s626 ITTOIA 2005).
Doesn't matter
Form 17 only applies where the split is NOT 50/50, which it automatically is with joint tenants.
See:
http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9844.htm
onwards.
As its H&W
income will automatically be split 50-50 in the eyes of the revenue - can only amend if declaration of trust and form17 submitted to hmrc.
Declaration of Trust
HMRC require a DOT witnessed by a solicitor in addition to the Form 17