Husband and wife rental income 90/10 split

...... also applies to Capital Gain

Didn't find your answer?

New clients of mine have sold a rental property, and made a profit.

They had previously had a declaration of trust drawn up, and submitted this to HMRC themselves with form 17, declaring a 90/10 split on both 'beneficial interest in the property' and 'beneficial interest in any income arising'.

Based upon this, I am saying that the capital gain should be split 90/10 - but they disagree.

Am I going daft in my old age ??

Thanks in anticipation....

Replies (7)

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By possep
13th Sep 2018 20:22

What's on the deeds? Surely immediately prior to sale 40% could have been gifted so the gain would be 50/50.

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By tonycourt
13th Sep 2018 20:30

You're right. Either they had 90/10 beneficial ownership or they didn't. If they didn't they ought not to have submitted a form 17 indicating that.

Nevertheless, ask them for a copy of the trust document so you can see what it says.

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Jennifer Adams
By Jennifer Adams
13th Sep 2018 20:42

possep is right - what do the deeds say? Did they actually get a solicitor to change the underlying ownership to 90:10?
I am presuming that they did as you say a deed of trust was set up.
Have a look at this article which details the use of the form 17. https://www.accountingweb.co.uk/tax/personal-tax/property-tax-form-17-ge...
It is the underlying beneficial ownership that determines the CGT treatment.
On the assumption that the legalities have been done correctly then if the income has been taxed as 90:10 then the CGT will be too.
Form 17 is only a form confirming that the signatories/owners of the property wish to be taxed for income tax purposes as per the underlying split of ownership (90:10 in this case). There is no form 17 for CGT

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RLI
By lionofludesch
14th Sep 2018 07:31

Agree with the above. The split for capital and income don't have to be the same but you'll have to look at the evidence to find the right answer.

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By Montrose
16th Sep 2018 12:18

Why not gift a share to other spouse to arrive at desired CGT treatment? Interspousal gift, properly documented has no CGT or IHT problem[provided donot is UK domiciled, [or both have non domicile status], which can trigeer an IHT issue-but would be a PET anyhow]

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Replying to Montrose:
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By Matrix
16th Sep 2018 12:44

Because the property has already been sold?

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By Justin Bryant
07th Nov 2018 19:23

There is no need for any deed if the parties simply verbally agree the CGT split between themselves. This has been stated here numerous times re beneficial ownership and HMRC accept that, as an oral declaration of trust is valid. (It is simply unenforceable should one of the parties challenge it - which is irrelevant here - and in any event it can be documented subsequently if necessary.) See para 50 of the case below for yet another example of this simple common "intention/agreement" (of the relevant beneficiaries) rule:

https://www.bailii.org/ew/cases/EWHC/Ch/2018/2362.html

See also para 390 here: http://financeandtax.decisions.tribunals.gov.uk//judgmentfiles/j10732/TC...

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