Client, a higher rate taxpayer, is the sole owner of a rental property. His wife earns nothing. He has entered into Declaration of Trust to transfer beneficial interest of the property 100% to his wife. This was done part-way through the 2012-13 tax year.
My question is - does the declaration of trust automatically take effect for the purposes of declaring the income from the property on the tax return? So the husband would have 100% of the income and expenses for the first part of the tax year, and the wife would have 100% for the later part of the tax year, from the date on the trust deed.
If this is the case, is there any way of over-riding the declaration of trust until the following tax year?
The reason for doing so is that there were some large (unforeseen) expenses in the later part of the tax year and it would be beneficial to offset these against property income for the full year. Otherwise, the husband will end up paying tax on a property profit for the first few months of 2012-13, while the wife will have a loss which is useless to her as her overall property income will never be high enough to pay tax.
(As an aside, does anything need to be filed with HMRC for the declaration of trust to take effect? As far as I am aware, a Form 17 is only required for properties in joint ownership,which does not apply in this case.)