Property split between husband and wife

Cook_County

arfur wrote: »

Rolo I did not say in my post that the accountants said it has to be split 50/50, what I did say was that they did not know much about it. They did not know much about anything in truth.

I know it can be done, and I know it has been done, the only thing I am struggling with is the detail behind it. Which is why I asked the question on the forum to see if anybody else knows the detail.

If you can not be helpful it may be an idea not to keep posting on the forum as your comments do not help in any way, and I am obviously not the only person who has an interest in this.

I can only assume that your "accountant" was unqualified. Why not report him or her to trading standards if they don't know basic UK tax law? How much did you pay him or her for not knowing?

biggingerdazza

TM1976. You may be wrong here. There is an article on it, but I can't post the ruddy link as a new poster! :mad:



Go to taxationweb DOT co DOT uk and add following link path after it "/tax-articles/property-taxes/the-principles-and-implications-of-joint-tenancy-and-tenancy-in-common-for-spouses.html"

I'm trying to do the very same thing here.

The article states :"Where the spouses do not wish to be subject to income tax on an assumed 50:50 split, they can make a declaration of their respective beneficial interests in the income and the property from which the income arises, provided that the beneficial interests of the spouses in the property correspond to their beneficial interests in the income. Thus, in the above example, the spouses could make a declaration under which the rental income is to be split 75:25 in line with their respective ownership proportions. However, it is important that the ownership proportions reflect reality i.e., if the above declaration is to be made then the spouses must own the property 75:25 which would mean ownership as tenants in common.

So I assume likewise it would be possible to allocate 99% to the wife insteead and get her use her lower tax allowance for 99% of the profit generated?

My question to the article is: If the husband currently owns 100% or the property, and is the only one listed on the mortgage, in what form can he go about assigning a 99/1 % split? I think that the deeds and the names on the mortgage need to be the same, so I would assume he'd need to:

1. Setup transfer of assets using solicitor to transfer 99% to the wife
2. Change the name on the mortgage and deeds so both spouses are listed on them
3. Fill in IR form to declare proportions matching those in the asset transfer

??

Thoughts?

TM1976

biggingerdazza wrote: »

However, it is important that the ownership proportions reflect reality i.e., if the above declaration is to be made then the spouses must own the property 75:25 which would mean ownership as tenants in common.

To extend the article:

It is not possible for the declaration to decree that the income from the property is to be shared between the spouses in a different proportion to that of the ownership. (For example, the declaration in the above example cannot specify a property split of, say, 80:20 to reflect the ownership of the property with an income split of, say, 60:40).

Therefore as discussed before you have to prove that the ownership is different to 50:50 you can't simply change the split of the income.

Mikeyorks

biggingerdazza wrote: »

Thoughts?

Better sticking with facts.

As said to the OP ....... read post #5 ...... it summarises it quite neatly in a single sentence?

biggingerdazza

TM1976 wrote: »

To extend the article:

Therefore as discussed before you have to prove that the ownership is different to 50:50 you can't simply change the split of the income.

Yes, I know. That's why I said about getting a legal declaration signed to say that it was other than 50/50. Surely if you go through a transfer of assets, and/or get a legal declaration setup with a solicitor that the wife owns 99%, you have your proof and can proceed with the aim of distributing the income proportionately (mirroring your asset ownership)?

So it seems you agree then?.... if you can prove ownership in any given proportion, you can claim income tax relief on any profit in that same ratio?

ceeforcat

Biggingerdazza – the one thing you have completely ignored is the reason for any such transaction.

If the sole reason for so doing is to avoid income tax (or CGT for that matter), HMRC will challenge the transfer, regardless of the legal proof. It would be up to you to prove otherwise.

TM1976

biggingerdazza wrote: »

Yes, I know. That's why I said about getting a legal declaration signed to say that it was other than 50/50. Surely if you go through a transfer of assets, and/or get a legal declaration setup with a solicitor that the wife owns 99%, you have your proof and can proceed with the aim of distributing the income proportionately (mirroring your asset ownership)?

So it seems you agree then?.... if you can prove ownership in any given proportion, you can claim income tax relief on any profit in that same ratio?

In principle yes but the beneficial ownership takes precident over the legal so changing the legal ownership doesn't necessarily follow through into the benficial ownership of the property.

In the case of the original poster she wanted to transfer the income to her husband but by her own admission she paid all the mortgage and was more likely to be the beneficial owner. In this case the assumption of a 50/50 split of income which was open to her was a better option (as described in the article you submitted) than attempting to declare on the basis of true ownership.

So if you want declare income based on a different split you need to be sure that the split is supported by the benficial ownership, you can't simply change the beneficial ownership to suit income tax it has to be supported by the reality of the situation.

As other posters have pointed out it may be better to go with the 50/50 allocation than attempt to prove an ownership split that isn't supported by the true beneficial ownership of the property.

To put is another way say you elect to give your wife 99% of the property how happy would you be if your wife sold it, gave you 1% and spent the 99% on herself?

harryhound

On the "good old days" of unregistered land, one could make changes to the ownership and simply put the documentation back in the deed box.

Am I right in thinking that pretty well all changes to land ownership has to be registered since last April?