Property Development and Tax

NavSG

Hi,

My wife has recently decided to return to work after taking time out to raise the kids. She has struggled to find suitable employment which offers flexible working hours so she has decided to develop property (buy, refurb, sell on). The intention is to trade in property rather than invest.

Due to having no income, she can not apply for a mortgage. However, I can. I was doing some research and was wondering if the following was possible.



Me becoming the legal owner and my wife becoming beneficial owner via declaration of trust. My name will be on the mortgage and registered with the Land Registry. If this is possible ? Am I correct in assuming that any profit made from the sale of the property would be classed as my wife’s income and thus allowing her to use her tax allowance ?

If the above is correct, at what time would I need to draft the declaration and what wording should it include ? Does the mortgage lender need to be informed ?

Is there anything else i need to consider ?

Any response is greatly appreciated.

Land_Registry

As far as the legal title is concerned the registered owner(s) would have to be on the mortgage as well. You can have the registered owners + extra names on the mortgage but not the other way round.

The beneficial title is a separate issue and I am sure something others will advise on but if you do enter into some form of trust then this can be protected on the register, often by means of what is known as a form A restriction - see our Public Guide 18

olias

Sorry to hijack this thread, but can I also ask a linked question which I think would also assist the OP.

If developing property for profit (one off, or multiple) as a sole means of income, is the tax payable just CGT, or would you have to register as self employed and pay income tax instead or as well as ????? thanks.

Olias

tim123456789

If you are making a regular business of development then you should declare the money as income and pay income tax on it (instead of CGT).

Where the line is drawn between a couple (or three) ""one-offs" and a regular business, I don't know.

tim

hazyjo

Do you/your wife realise people can't usually get a mortgage on something which has been owned for less than a year by someone?

How long are these refurbs likely to take?

Wouldn't have thought it was the right economic climate for beginner property developers. Most are having to rent out their developments rather than sell.

The costs in buying and selling can be astronomical. Have you factored in that, as well as the other expenses?

Property still isn't selling well generally, except for in certain parts of the country. What makes you think you/your wife can turn something around and actually sell it quickly? Take a look on RM at some of the 'done' houses in the area you're thinking of buying in and then Property Bee them to see just how long they've sat on the market.

Jx

NavSG

Land_Registry_representative wrote: »

As far as the legal title is concerned the registered owner(s) would have to be on the mortgage as well. You can have the registered owners + extra names on the mortgage but not the other way round.

The beneficial title is a separate issue and I am sure something others will advise on but if you do enter into some form of trust then this can be protected on the register, often by means of what is known as a form A restriction

Hi, thanks for your reply. The legal title and mortgage will be in my name. The beneficial ownership will be in my wife's via Declaration of Trust.

If there is no change in legal ownership is there any requirement to inform the Land Registry ?

Land_Registry

If the title is already in your sole name then there would simply be the mortgage (charge) to register.

If the property is registered in joint names then you would presumably want to transfer it into your sole name. The new mortgage process would then cover off any existing mortgage as well i.e. you would remove existing mortgage, register transfer from 2 to 1 and the new mortgage all in one application.

The new mortgage lender would most likely require you to use a conveyancer but our online FAQ explain how a Transfer can be completed