Transfer of tax liability for land and property from wife to husband

THEWARRIOR_2

My wife and I have 2 properties which we let out as buy to lets. They were not bought commercially as buy to lets - one was my wife's house before we married and the other is a separate flat in my house which is now the house we live in. The rental from both is paid into a joint current account. For tax return purposes we have each declared 1 property each on our tax returns. This has not previously raised any issues but for the 2009-10 year I did not pay higher tax, in all other years before and since I have. My wife has paid higher tax throughout. It would be advantageous for me to put the income from both properties on my tax return. I have heard that a declaration of trust would enable me to do this - We both have POA's over each others properties to enable us to authorise repairs etc, but I don't believe this is the same. Can a Declaration of Trust be now set up and be retrospective for tax year 2009-10, and if it is set up how easy is it then to move from one income to the other?

chrismac1

If you look at the HMRC rental toolkit - PM me for a link as it won't work in the thread - this is one of the issues they are on the lookout for. Here is a relevant extract:

"Establish if rents have been received from a jointly let property. Ensure that the share of the profit or loss shown on the tax return is divided between the owners according to their share of the property unless a different division has been agreed between them.
Where the individuals are married or in a civil partnership ensure the profit or loss is split 50/50 unless an election is made for their share to match the share of the property they each own."

You have either got a Declaration of Trust in place or you have not, so the retrospective thing is not going to work. Also note that you are changing the legal ownership of the property which could have other implications - for example, whose name is the mortgage in and will they be OK if you just carry on without informing them? Some folk put these things through on the quiet then find out the hard way that the mortgage provider was in fact not OK with it.

If you execute a Declaration of Trust and do it properly - telling the mortgage provider, house insurer etc - then it is 100% through your tax return until such time as you execute another.

Pennywise

Also, don't forget about principal private residence relief (PPR) for capital gains tax which can be partly or wholly lost if a share in the property is transferred from a spouse who lived in it as their home to the other spouse who never lived in it as a home. The potential loss of PPR when the property is eventually sold can cause a huge capital gains tax bill which would otherwise have been avoided had the property been kept in the sole ownership of the original owner who lived in it! You need some proper advice from an expert before making any changes to the beneficial ownership!

THEWARRIOR_2

Many thanks for your help