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Author: DEFERREDPENS One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 39720  
Subject: Buy to let income Date: 16/07/2008 22:04
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Does anyone know - if I want the income from my buy-to-let apartment to count as my wife's income instead of mine for the current tax year, can I just write a statement transferring ownership of the apartment or do I need a solicitor to prepare something more formal? i.e. what will the Inland Revenue accept? And is the income only hers from the date of this document or for the whole of the tax year irrespective of when the document is created?
Many thanks for any advice
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Author: JonEBehr Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29119 of 39720
Subject: Re: Buy to let income Date: 17/07/2008 01:32
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...if I want the income from my buy-to-let apartment to count as my wife's income instead of mine for the current tax year, can I just write a statement transferring ownership of the apartment or do I need a solicitor to prepare something more formal?

The straighforward situation is, in my lay understanding, that if you are the sole owner of the property then the income is solely yours. If you want to transfer any part of the income to your spouse then you'll need to transfer some part of the ownership to your spouse. If you gift her only part then you should be tenants in common with appropriate percentages. If the property is mortgaged then lenders nowadays will want a 100% match between the names on the property title and the names on the mortgage deed - apart from the legal costs of altering (and registering) a change of title, how expensive this rearrangement of mortgage borrowing might be will depend on the current attitudes and policies of your lender, your loan agreement, whether you're in a tie-in period, the fees they want to charge and so on. Given that it's a leasehold property, you may need the freeholder's consent to assign the lease and your lease may make provision for you to meet his costs in granting that consent in the same way that it may require you to meet his costs for granting a licence to sub-let.

Once in joint names then you can seek to split the tax liability. However, "..where the joint owners are husband and wife, or civil partners, profits and losses are treated as arising to them in equal shares unless:
both entitlement to the income and the property are in unequal shares, and
both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.
"
and
"Husbands and wives or civil partners living together should generally be treated as entitled in equal shares to income from jointly held property. See:
ICTA88/S282A for years up to 2006-07, and
ITA07/S836 for 2007-08 onwards.

However, this rule will not apply in any of the following instances:
[...]
both husband and wife, or both civil partners, have signed a declaration under ICTA88/S282B or ITA07/S837 stating their beneficial interests in both the property and the income arising from it,
but a declaration is only valid if their interests in the income and in the property itself correspond.
":
http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm

Note that the split of the interests for Capital Gains Tax purposes will correspond with the split for Income Tax purposes. The Independent Taxation Manual mentions that tenants in common (in E&W) could have differing entitlements to the capital and the income but that situation is not acceptable to HMRC for the declaration mentioned above. "Form 17" is relevant here, I believe, but I think it can only be backdated for a couple of months. Note that the split could be as extreme as 100%/0% - or, at any rate, very nearly so.


A less straighforward situation was, several years ago, suggested on these boards that would, IIRC, involve a set of commercial decisions starting with the gifting by you of a lease (it might have been suggested that this could be undocumented) for an unspecified period to your spouse such that the legal ownership remains with you but the right to income from letting the place is transferred to your spouse. I don't know whether this has ever been tested by HMRC, have no idea whether there's a potential problem if your lease prohibits this sort of dealing and wonder if the more recent requirement that leases be registered at Land Registry might now scupper this cunning plan. You'd still get hit with all the CGT as the property remains in your sole name - if there is likely to be any capital gain in the property when it's sold then this could be a more significant aspect to consider than income tax.

Did you have a reason for putting the apartment in your sole name or is it merely that you owned it before you married and haven't yet remortgaged so haven't yet had the opportunity to put it in joint ownership?

Cheers!

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Author: rodi101 One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29121 of 39720
Subject: Re: Buy to let income Date: 17/07/2008 14:06
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Very good reply from JonEBehr have a rec.

Maybe it is possible for your wife to manage the let and thus charge a percentage of the rent as a management fee, as you are working she is arranging the let and sorting problems.

Obviously this would be taxed income but would utilise your wifes allowance and be at a lower rate of tax than yours - depends whether the amounts are worth it !

RODI

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Author: MyNameIsUrl Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 29122 of 39720
Subject: Re: Buy to let income Date: 17/07/2008 15:08
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JEB mentioned a thread some years ago on this topic. Maybe this is the one:
http://boards.fool.co.uk/Message.asp?mid=7460614&sort=whole#...

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