Tax situation on UK rental house when living abroad

Scr00ge

I have quite an interesting tax situation and would like some help:

I am currently living in the USA as an expat, and have rented my house in the UK. My house was purchased in my name, and I have paid off all the mortgage (except £1) so I don't have to own the deeds. The rental profit on the house is about £11,000 per year (as I have no mortgage interest). I have also filled in the Non-Resident Landlord form so that no tax is paid at source.

However, I can see from my last year's UK tax return, that my tax-free personal allowance is taken out of the rental profit, and then it is taxed in the usual way against me.

However, I am married, and want to try to use my wife's personal allowance against the rental profit to reduce our tax.

Can anyone give any help on how I should do this?

I've spoken to a few people who have told me that the tax man would not consider that my wife and I living in the house for the previous 10 years together would constitue joint ownership, and that they would simply look at the name on the deeds. Because of this, I am looking at changing ownership to be in joint name, but cannot work out if I will be liable for stamp duty by doing this.

Can anyone comment on whether any of the above is correct?

Many thanks.

fengirl_2

Yes, if you transfer half of the house to your wife, half the rental income will be deemed to be hers and her tax free allowance will be available to set against her share of the profit. The transfer will be exempt from CGT, but am not sure about stamp duty.

Cook_County

Depending on the amounts involved you may be eating into your lifetime gift tax exclusion - you may also need to recognise a foreign currency gain on the mortgage. You would need to look at your company's policy to see if they will pay the US taxes & tax preparation costs for these items.

Scr00ge

Cook_County wrote: »

Depending on the amounts involved you may be eating into your lifetime gift tax exclusion - you may also need to recognise a foreign currency gain on the mortgage. You would need to look at your company's policy to see if they will pay the US taxes & tax preparation costs for these items.

Cook - Thanks for posting replies in this forum as well as the other one... I realise that I have asked the question in different forums.

I'm not sure whether I understand your response here - I am from the UK, but working in the USA for 3-4 years, after which I will return to the UK. Is the lifetime gift tax exclusion a US thing, or UK?

I'm also confused by the part about the foreign currency gain. In the UK, I believe I can gift any portion of the property to my spouse and not be liable for tax. I was also told by the person who prepares my USA tax that I would not be liable for USA tax when I do this (as I am obviously currently liable for USA tax rules whilst I am resident here for tax purposes). Is there something I am missing?

Thanks.

Cook_County

I suggest you refer your US accountant to the Quijano case if he/she does not understand foreign currency gains.

Your accountant should also advise you about US gift taxes.

Scr00ge

Cook_County wrote: »

I suggest you refer your US accountant to the Quijano case if he/she does not understand foreign currency gains.

Your accountant should also advise you about US gift taxes.

Cook - I will ask my accountant again if I will be liable for any USA tax on this before proceeding. Could you explain briefly about the US gift taxes, and how it may affect me with this transfer to my wife?

Thanks.