We are lucky enough to keep a property that was once my husband’s main residence for 9 years. He is the sole legal owner and I have never lived in the property. Since mid 2016, the property has been rented out and the income declared on my husband’s tax return. He is a higher rate tax payer, while I am paying tax at basic rate.
We are looking at possible options to migrate this rental income to myself, so it would be taxed at my basic rate, but also retaining the 9 years PPR. From researching online and reading through the many forum’s highlighting this issue, I have concluded there are 2 possible options.
Option 1
To hold the property as tenants in common. Submit form 17 along with the delaration of trust to HMRC to split the beneficial ownership - 1% to my husband, 99% to myself. Any rental income is taxed according to this split. Before sale of property, we will submit another form 17 and declaration of trust to reverse the beneficial ownership. So my husband can retain 99% of the 9 years PPR against the gain.
Option 2
Legal title remains with my husband. We enter into a declaration of trust under which he transfers 99% of the beneficial interest to me, therefore he owns 1% and I own 99%. Any rental income is taxed according to this split. Prior to sale, my 99% interest will be transferred back to my husband, so he is able to use the full 9 years PPR against the gain.
For option 2, can we create this type of declaration of trust by ourselves and do we need to submit it to HMRC?
I want to know which option is viable and most importantly have I missed out any points that would be a deal breaker.
I will be most grateful for any advise on this matter.
Kind regards,
Rachael
Replies (18)
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Have you tried the HMRC helpline? They are pretty good at giving free tax advice.
Unfortunately, accountants (the target audience for the site) want paying! Imagine that! Expecting to be paid for giving valuable professional advice!
I think you are in danger of reaching conclusions without understanding the issues.
Bear in mind too that (the) law (governing the issues) changes.
I think Option 2 should work OK and a two simple DoTs should do the trick. You need to be careful re any mortgage re SDLT.
But if you were a tax advisor (OP - he's not), you'd realise that there's a better alternative.
Well, we know that Justin doesn't understand what's happening then. (Does the OP, do you think?)
No-one here is stopping you do your own tax planning. (Obviously we could not, even if we wanted to.)
We just all (probably even including Justin, if he was honest) think you would benefit from paying for some advice.
The other option is a p-ship, but that can cause SDLT issues when adjusting income profit shares and is a bit OTT anyway in your case. You can contact me at www.ated.co.uk .
The other option is a p-ship, but that can cause SDLT issues when adjusting income profit shares and is a bit OTT anyway in your case. You can contact me at www.ated.co.uk .
Yes, we will look for paid advice.
Good plan.
I wouldn't normally do this, but he is rather asking for it... I'd suggest not taking advice from someone who
a) isn't a tax advisor
b) doesn't (begin to) understand the 6/4/20 changes
c) tries to feed you some BS about a p-ship and
d) keeps editing his (or her) posts
Not that you'd be that stupid anyway.
I've not seen (to my knowledge) the advice of anyone in this forum outside of this forum. Comments made in here (other than the oft-repeated "get an accountant" type rematks) are not advice. There are very few, if any, of us that comment on a reasonably frequent basis that haven't said something stupid. (I can think of a few that have probably even sung it :-))
It is particularly stupid though openly to display ignorance in a pitch for business. Something about that got my donkey. (Curiously, he doesn't know when to shut up either.)