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Form 17 - but what else ?

Form 17 - but what else ?

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Members' views are requested re the "practical" aspect of the valid tax-saving technique of apportioning Rents in respect of property held jointly by "man and wife" [or civil partners].

Typically, where one spouse is a taxpayer and the other spouse is not, apportioning the Rents (say) 99.9% to "wife" and 0.1% to "man" [assuming the "man" to be the taxpayer] would be advantageous. Section 836 Income Tax Act 2007 requires that where the couple own property jointly, it is required for tax purposes to be allocated equally, regardless of actual shares owned. Section 837 of that legislation enables the income proportions to be varied, but on condition that the capital and income shares of the property are the same as each other. Sections 836/837 apply to all types of property held by "man and wife", but my question specifically concentrates upon Rents from land and Buildings.

HMRC are of course required to be notified of "Section 837" submissions by means of Form 17. I gain the impression that some accountants [and taxpayers] consider that simply submitting Form 17 [which is required to be signed by both parties] to HMRC, showing the capital and income shares, is itself sufficient to establish that a "Declaration of Trust" is in force. That said, my feeling is that the majority view within the profession is that Form 17 must be supported by a separate "Declaration of Trust" document. My understanding is indeed that whereas some HMRC offices only require submission of Form 17, others require sight of a separate "Declaration of Trust" document to substantiate that Form 17.

As regards "Declaration of Trust" forms, there are "example" forms available on the internet and elsewhere, requiring very little material input, and thus minimal time costs. I surmise that the majority of accountants use, from whatever source, such standard "Declaration of Trust" documents. Seemingly at the top end of the scale are those accountants who however consider that a "Declaration of Trust"​ document should be prepared professionally by a solicitor, and indeed I have seen quotations for such work which would result in legal costs of over £1,000. Somewhat digressing, I am not entirely sure that accountants/taxpayers appreciate the necessity to first establish whether the Property is owned as "joint tenants" or alternatively "tenants in common" [since if course where the property is held as "joint tenants", then one can only apply for a variation of the allocation of Rents under section 837 after first changing the "joint tenants" position to "tenants in common"]. [I have recently noted legal advice that it is insufficient simply to prepare a "Declaration of Trust" and that one must also submit a copy thereof to the Land Registry]. There thus appear to be two ends of the spectrum of opinion, at the "lower" end of which is that only Form 17 itself is required, the "higher" end being that one should engage solicitors [at a cost potentially of over £1,000] to prepare a Declaration of Trust, and then submit it to the Land Registry. Somewhat in between [albeit nearer the "lower end"] is the accountant's, with minimal cost, using a standard [off-the-shelf type] "Declaration of Trust" form.

I would appreciate members' views of their procedures [ and the legal requirements] in relation to this matter. Basil.

Replies (10)

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By King_Maker
26th Sep 2014 18:21

Form 17 itself states that evidence of the beneficial interests should be sent in with the Form 17.

An Oral Declaration of Trust is perfectly valid - except in the case of Land, it has to be evidenced in writing -  there is no requirement for a Deed.

It is not that difficult to do - I have done it quite often when so requested by a client - my charge was (and is) £00.00.

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By carnmores
26th Sep 2014 20:32

i am confused as to whether a married couple
Can use a 17

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By essex accountant
26th Sep 2014 23:54

solicitor's fee

I had a quote on behalf of a client today to prepare a simple Declaration of Trust from a several partner local firm of solicitors of £350 + VAT. The partner time for this should be 30 minutes including seeing the client. I believe there is work for the Land Registry but I do not know what else is done and how much time this takes. Does anyone else know? Completing Form 17 is simple. I told my client that total one-off fees of £500 including my fee would save him about £1,200 a year. The net rents are £6,000. The property is jointly owned. The husband's 50% of the income - £3,000 - would otherwise be taxed at 40%. The wife has no other income. Spending £500 to do this very professionally is a good investment. I am happy for my client to pay a solicitor £350 + VAT to give 100% peace of mind and the solicitors PII policy to fall back on if it is not done correctly. I do not think my own PII policy would cover this if I prepared the Declaration of Trust.

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By taxguru
27th Sep 2014 09:09

Just a few points:

1. Whilst the title of s.836 is 'jointly held property' - what the section says is that:

income arises from property held in the names of individuals— (a)who are married to, or are civil partners of, each other, and (b) who live together. So strictly speaking it is not about 'jointly held property'!

I would interpret this to mean that even where the actual ownership is say 90:10 this section applies. As an example Mr and Mrs owns the property 90:10 having been gifted that way, so they will still need to file form 17.

2. Declaration of trust - this is required only where other documentary evidence like the gift deed at 2 above,which conclusively prove respective ownership, doesn't exist. I do not think that it's a requirement under the tax laws that the declaration of trust should be registered with the Registry: for tax treatment a valid declaration itself is sufficient.

 

 

 

 

 

 

 

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By King_Maker
27th Sep 2014 09:10

@ Basil - forgive the incompleteness of my earlier reply - it was written in haste, as I was trying to make an early escape.

Although I make no charge for the Declaration of Trust (oral or written) - as only Solicitors or Barristers can so charge for certain instruments of transfer- there would be a fee for the advice and submission of Form 17.

In addition, I always strongly recommend that the client's solicitor reviews the paperwork, keeps it with his/her Will etc etc.

Invariably, I receive such requests at 23.00 on 5 April, or just before the sale of a large portfolio of shares, :)

 

 

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By TickTock
27th Sep 2014 10:34

Declaration of Trust
I have H&W who own a property 50:50 as tenants in common (no mortgage). She doesn't have enough income to pay tax and he pays at 20%. So they are having a declaration of trust set up so she will beneficially own it 100%. The DoT is costing £300 + VAT plus £6 land registry fee from a local several partner firm of solicitors.

I had planned on filing Form 17 with a copy of the declaration but having read some of the other threads do I need to? The wife will own it 100% so no longer jointly owned - or perhaps I should file it just for clarity at HMRC?

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Replying to CelinaC:
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By martinscutt
27th Sep 2014 10:47

Tenants in common

TickTock wrote:
I have H&W who own a property 50:50 as tenants in common (no mortgage). She doesn't have enough income to pay tax and he pays at 20%. So they are having a declaration of trust set up so she will beneficially own it 100%. The DoT is costing £300 + VAT plus £6 land registry fee from a local several partner firm of solicitors. I had planned on filing Form 17 with a copy of the declaration but having read some of the other threads do I need to? The wife will own it 100% so no longer jointly owned - or perhaps I should file it just for clarity at HMRC?

The wife has 100% beneficial interest by way of DoT they are still tenants in common, so my understanding is it would be an automatic 50/50 income split unless you send in form 17.  I could be wrong, but given that all the expensive work is done I would send it in anyway.

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By King_Maker
27th Sep 2014 11:51

@ taxguru - Section 836 ITA 2007 is only relevant to joint Legal ownership.

1. So, if the legal ownership is in a single name, a transfer to another (90:10 in your example) can only operate in Equity. Therefore, Form 17 is not required -  but it is often (?) sent anyway.

2. There is no need to inform the LR - but may be advantageous.

Interestingly, HMRC, will consider Form 17 as evidence for the beneficial shares for CGT purposes :

http://www.hmrc.gov.uk/manuals/cgmanual/cg22020.htm

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By juicy lucy
18th Nov 2015 11:05

Death, Form 17 for rental properties jointly owned

Assuming that should husband and wife be tenants in common, say with 90/10% split for form 17 purposes and declaration of trust so that wife receives the bulk of the income, what happens if husband dies?  Does his share go to his estate in 50/50 proportions (assuming that is how the property is held) or does 10% go to the estate?

 

I give this example as the husband and wife both have children (him two her one) from previous relationships, and their intention is for the estate to be split 50/50, so 50 going to hubbys two sons and 50% going to wifes daughter.  As it is a blended family the 90/10 split is important.

 

In the same respect does the 90/10 rule apply should wife need to go into a home?

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