Joint mortgage, house purchase in sole name?

Carafan

Hi,
Just looking for a bit of advice and wondered if anyone might be able to shed some light on this.

Me and my husband have the opportunity to buy a house from a relative which we would use as a long term BTL investment. We have a BTL mortgage approved in principle in joint names however we were wondering if we could purchase the house in my sole name to avoid paying tax on any income we make (husband pays higher rate tax, I have a small part time income which is below my personal tax allowance).

So basically my question is can you buy a house with a joint mortgage but have only one name on the deeds?

Many thanks

kingstreet

Not normally, no.

You need to ask your solicitor to purchase the property as a tenancy in common and then apportion the equity 99%/1% to maximise the tax efficiency of your let.

Carafan

Thanks for the advice, I had a feeling that it wouldn't be straight forward! Can go to my solicitor and sound knowledgable now!

kingstreet

You'll need a Deed of Trust drawn up by your solicitor to do the equity apportionment, so another buzz-word you can use.

Carafan

Thank you, I like to sound as if I know what I'm on about even though clearly I have no idea

kingstreet

Some extra info;-

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.

http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm

Conrad

kingstreet wrote: »

Not normally, no.

You need to ask your solicitor to purchase the property as a tenancy in common and then apportion the equity 99%/1% to maximise the tax efficiency of your let.

I cannot think of a lender that would allow this as there is a specific declaration that the asset is to be held jointly and in equal proportion. Furthermore joint parties are jointly and severably liable. If you start aportioning 1% ownership, some mortgagees would interpret this as they have a 1% liability, meaning if the couple fell out, this party might nwell argue in court they are only due to pay 1% of the mortgage.

OP - why not use your name only? Some lenders can allow this, even if you have low income.

kingstreet

AFAIK joint and several liability for the mortgage isn't affected by a decision to buy TIC and apportion equity other than 50/50.

It's a fairly normal route for unmarried partners using unequal deposit amounts to purchase together and for couples to buy to let while using the unused tax allowance of a non-taxpaying partner.

holly_hobby

Ok, lets clear any confusion !

The manner in which a property is held either under a TIC or JT arrangement, is to do with legal and beneficial ownership only, and has no bearing on debt liability of the mortgagors to the mortgagee - which is jointly and severally between ALL mortgagors period (as Kings correctly states) - indeed the lenders have no interest on the equittible beneficial details on how the property is held, just that all those named on the deeds and legal owners are party to any mge for pursuance purposes.

OP - and specifically in relation to splitting ownership for BTL profit/tax purposes - as a married couple you may unequally split profits, by jointly owning, but under a TIC arrangement, which will facilitate an unequal proportion of beneficial ownership as reqd. The split of ownership to HMRC will be declared via HMRC form 17, which is then directly used to recognise the apportion and mirror the taxable income declared under each return i.e 99/1 or whatever split you chose.

But simply effecting a TIC arrangement on its own is not sufficient to achieve this with HMRC though, and as I say in order to lawfully split the profits as reqd and in accordance with the TIC denoted ownership, the indviduals must also complete and sumbit HMRC FORM 17 ( to HMRC of course), which formally declares the division of beneficial ownership between the parties, such as the details of % split, and the equivilent (which must be a mirror of the TIC) % split of declared net BTL profits, which will be accordingly reported under each individuals annual return.

Here is HMRC Form 17 for you to print off and complete, http://www.hmrc.gov.uk/forms/form17.pdf, your conveyencer/tax adviser or even HMRC, will assist in its completion if reqd (but its pretty straight forward TBH).

Be sure to ensure that you apply all permitted deductions off your gross rental income, in order to mitigate tax as much as possible (after all who wants to pay tax that lawfully may be reduced !). A big one is the interest on any mge used to pch the property, or that is subsequently invested into the business (which can also include remortgage finance (subject to restrictions), and capital raised on your primary residence but injected into the business).

Other main deductions are costs such as associated management and accountancy fees, essential repairs, etc ....

Hope this helps get you started ...

Good luck

Holly x

Conrad

holly_hobby wrote: »

Ok, lets clear any confusion !

lenders have no interest on the equittible details on how the property is held,

Holly x

Holly can you provide me an example of a lender that would allow such?

There is a question on every lenders application that reads "I/we can confirm the property is for the applicants equal benefit".


I can understand HMRC allowing income from a B2L to be apportioned, but that's entirely a separate matter.

holly_hobby

Hi Conrad,

In my experience I've never know a lender with an issue re TIC (irrespective of equittible split), as Kings also states - so it may be easier to note which lenders you have found that you say won't accept sureity that is neither held under a jnt tenancy or 50/50 TIC arrangement

Equal benefit of use is different to legal ownership (which is essentially what the deeds denote and facilitate) and beneficial ownership - IMHO equal benefit definition as per mge T&Cs, would be that the unit is wholly and entirely used by the mortgagors as their beneficial and joint primary residence (ie not to be interally split and resided in separately (although we know that some couples following a breakdown, may restrict themselves to defined parts of the property), or for the benefit of any other non-declared individuals). If its thought that this isn't the case, then whats essentially being floated here, is that lenders simply refuse to lend to mortgagors whom wish to hold the property under an (unequally proportioned) TIC arrangement. Which as I say isn't accurate from either my own professional or personal experience, as its the legal ownership of the mortgagors that denotes pursuance, plus any trust deed between the 2 parties will not binding on 3rd paties such as the mortgagee, whom as I say can and will puruse all mortgagors in the case of default.

So no matter if there is a TIC & Trust set up, all mortgagors, which must mirror those named on the deeds ie legal owners, are jointly and severally liable for the entire mge debt (indeed they agree to this as part of the mge application itself). So equal and lawful pursuance of one and all mortgagors for the entire mge debt, will neither be inhibited, restricted or dictated by the actual format of any TIC arrangment that may be in place, meaning as I say that the actual division of equity under the TIC, would be irrelevant in respect of the mortgagees pursuance of all mortgagors, or indeed the mortgagors responsibility of servicing the debt.

Hope this helps

Holly