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rental property | accountingweb | Changing the split of income from joint property

Changing the split of income from joint property


Exploring Form 17, used to declare beneficial interests in joint property and income, Reshma Johar found more questions than answers.

16th Feb 2024
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Form 17, used to declare beneficial interests in joint property and income, is for couples who jointly own property and want to change the split of income from it.

The form is only required for married or civil partners who jointly own land/building property and want the income split outside 50/50. 

Married couples or civil partners will be treated as living together unless:

  • they are separated under an order of a court of competent jurisdiction
  • they are separated by deed of separation, or
  • they are separated in circumstances where the separation is likely permanent.

Where a married couple or civil partners are separated, the separated spouses or civil partners are taxed on their actual entitlement to income.

Legal ownership relates to the legal title to the property and whose name is attached to it.

Beneficial ownership

When income is held jointly by a married couple or civil partner, it will be treated automatically as being beneficially owned equally by them (even if the capital split is different). As such, any income generated will be subject to income tax on income split equally by them. 

The 50/50 equal split would end if the couple do not meet the living together condition or if one dies.

The equal split of income will not apply in certain scenarios.

Joint property ownership

Before considering whether a Form 17 is the right move it is important to also consider how the property is legally owned. Joint tenancy means that the owners have equal rights to the whole property and not a share in the property. It also means that the property will automatically pass to the other owner if one was to die. This differs from tenants in common where each owner owns a share of the property and on death that share does not automatically pass on to the surviving owner of the property.

Because of the definition of joint tenancy, a Form 17 could not be applied to change the income split.

Completing Form 17

The form needs to be completed online and then printed to be submitted to HMRC. The information needed is:

  • for the spouse or civil partner completing the form: name, address, national insurance number, tax reference (unique taxpayer reference)
  • for their spouse or civil partner: name, national insurance number, tax reference (unique taxpayer reference)
  • address of property held in joint names
  • beneficial interest of each spouse and civil partner in the jointly held property.

The form ends with a declaration from both spouses/civil partners and a requirement for each of their signatures. The form must be submitted to HMRC within 60 days of the declarations being made. The declaration will continue to have effect until there is a change in the beneficial interests of the individuals in either the income to which the declaration relates, or the property from which that income arises. If the form is submitted outside the 60 days, HMRC will treat it as invalid.

The form does not apply to the following scenarios (detailed on the first page of the online form and ITA 2007, s 836(2)):

  • income to which neither partner is beneficially entitled
  • partnership income
  • income from commercial letting of furnished holiday accommodation
  • income from shares in a close company
  • income which for tax purposes is treated as income of a third party, even if the income arises from property held in joint names
  • property held as beneficial joint tenants where the partners are both jointly entitled to the whole of the property and income
  • property that is not held in unequal shares (it is not possible to choose to have the income taxed on an unequal basis because it would be to the partners’ advantage).

When a form was never submitted

What if a form has never been completed or submitted? The split of the beneficial ownership only applies on or after the date the Form 17 is signed. This means if a form was never signed (and never submitted to HMRC within 60 days), the married couple or civil partners for income tax purposes are beneficially entitled to the income in equal shares. 

Settlements legislation

It is worth remembering that this exists. Broadly, this is anti-avoidance legislation.

However, the ability to split the income from property by using Form 17 is accepted practice. It is therefore difficult to see how the settlements legislation can be applied.

Here are just a few potential areas that HMRC might enquire into.

  1. Is the property actually held as joint tenants and therefore Form 17 should not have been applied?
  2. Is there a valid Form 17 in place and are the income/expenses split correctly?
  3. Is there evidence to support the Form 17 income split to not be 50/50?
  4. Do the declarations reflect the actual position?
  5. Was the form submitted within 60 days?

Lack of records

The original ambition of this article was to provide data from HMRC on Form 17 declarations including: 

  • number of forms being submitted
  • how many forms are being submitted outside the 60-day deadline
  • number of tax enquiries from HMRC which explored spouses/civil partners having different income splits and no Form 17 in place
  • how many spouses/civil partners have splits that differ to what was reported on the Form 17.

Unfortunately, this information is not something HMRC can provide currently, but it was interesting to learn that HMRC currently do not hold a central record specifically for Form 17 submissions or data within the forms. Many of the forms submitted to HMRC by taxpayers are stored on an electronic worklist, which also houses and stores other forms. I was told by HMRC that in 2023/23 HMRC had stored 43,000 items of work within the electronic worklist.

The lesson here is to ensure records are kept where a Form 17 is used alongside any supporting documentation leading to the difference in income split.

Replies (2)

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By Justin Bryant
16th Feb 2024 15:29

Another big misconception is that the income split under a DoT can only be at most 99/1, whereas it can actually be 100/0.

Thanks (1)
By roger heath
19th Feb 2024 11:41

A possible problem which I have encountered when lodging the form 17 and declaration of trust is that HMRC will not acknowledge safe receipt even when sent by registered post.

Thanks (0)