I hope you can help with the following which probably happens quite often but seems to be unreasonably difficult to restructure :
Two partners have purchased properties separately in their separate names as residential property in 2006.
The married in 2007 and started living in one of the properties being their main residence.They have rented the other one (owned solely from the husband)
The husband is a higher rate tax payer! The Property Income from the rented property is taxed at the higher rate for the husband.
Because it is not a jointly owned property they can not opt to apportion the Property rental income and transfer let's say 50% to the wife.
It looks like the method of Form 17 and (deed of trust etc..) can not help in the scenario.
I believe that if they sell the second property in 2015 they will also have to pay CGT on gain arising for the period from which it has been rented 2007 to 2012 (three years before sale)
Hopefully the Property Relief of £40K will apply and if you add the CGT relief of £11K they may avoid the potential CGT if it is less that that.
However, Rental Income is still an issue.
Transferring Legal ownership is going to be complex (mortgagees and cost involved)
Transferring only a beneficial ownership may be an option, but not sure if it will satisfy HMRC requirements.
There must be some form of legal arrangement allowing for the partners(married couple) to agree the split of the income.
Thank you for your input.