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Division of UK property profits

Division of UK property profits

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This scenario is a husband and wife team.  The wife is fairly wealthy, a higher-rate tax payer, who effectively set her husband up in business; buying properties to let out to students.  The wife put up all deposits to buy the properties.  So far, they've got 8.  All mortgages and deeds are in joint names (husband and wife).  Combined annual profits (basically rent income less mortgage interest and minor repair expenses) are around £35000 per year.  All profits are drawn and spent personally by the husband only.  It's his sole livlihood.  He also manages and maintains the properties.  The wife has no involvement in this whatsoever, neither wishes so in the future.  She draws nothing from the activity.

But what about the profits?  Can they be entirely declared in the husband's name?  He would of course pay tax at the lower rate.  Or, because the properties are jointly owned by the wife, must 50% of the profit be declared in her name?  She would of course pay tax at the higher rate.

Your opinions are appreciated. 

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By TaxationPete
15th Oct 2010 12:54

Profit

The profits are to be declared by default at 50/50 HMRC rules as they are married and joint owners. However a Declaration of Trust can be drwn up to alter the Beneficial ownership to what ever percentage suits best. You report this ownership to HMRC on Form 17. Regards Peter

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By james burton
15th Oct 2010 13:19

Husband and wife

Pete, I've just discovered that the 'partners' in question are not married.  They are common-law only, which I guess does not qualify as civil.  They have children and live together as man and wife but are not married.  How does this effect the situation?  I've looked at the form 17 and it specifies married or civil only.

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By TaxationPete
15th Oct 2010 18:15

Simple

A simple letter to HMRC from both parties. One directing all the rental income to H and H declaring the income is his. An informal Declaration of Trust apportioning the beneficial income would be wise to hold. Regards Peter

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