Declaration of Trust - Confused!

confusedtom

Hi

Apologies if this has been posted before, I had a quick look through the archives but couldn't find the answer.

Basically I own a flat in my name with a standard resi mortgage with HSBC. I am about to remortgage to a Natwest BTL mortgage so that I can rent it out and release some equity, and this new mortgage is going to be in both mine and my wife's name. We have had the mortgage offer through and all is set to be completed in a few weeks time.

As I am very close to being a high-rate tax payer, when we rent it out I would like to apportion the majority of the rent received (say 80%) to my wife's name (who is a low earner) so that we minimise the amount of tax payable to HMRC. I understand that this is possible and more importantly legal, but I am unsure as to how to do it. My solicitors have just given me the Land Reg TR1 form to fill in and sign, which has a section on 'Declaration of Trust', which I presume relates to my query. It reads as follows:

Declaration of Trust: The transferee is more than 1 person and:
1. they are to hold the property on trust for themselves as joint tenants
2. they are to hold the property on trust for themselves as tenants in common in equal shares
3. they are to hold the property on trust: .....

Would I be right in thinking that I need to tick number 3 and state 80% Wife's name & 20% My name?

My solicitors were pretty clueless about it all. The research I did online suggested that I also need to send a Form 17 to HMRC within 60 days to ensure that rent can be split in accordance with the trust declaration.

Any advise would be much appreciated, as I want to get this right first time with no adverse repercussions coming back to bite me in the future!

Thanks

confusedtom

Do any experts know anything about this? Pleeeasssee?!

Thrugelmir

confusedtom wrote: »

Any advise would be much appreciated, as I want to get this right first time with no adverse repercussions coming back to bite me in the future!

Thanks

HMRC can decline the application for anything else other than a 50/50 split. As your proposed application is patently with the intention of reducing your tax liability, nothing else.

confusedtom

Thanks for the reply Thrugelmir. How would HMRC know that it is with the intention of reducing my tax liability? I don't see anything on the TR1 or form 17 that requests further explanation or information on my part?

Are you aware if this is a common practice amongst BTL investors?

Thrugelmir

confusedtom wrote: »

How would HMRC know that it is with the intention of reducing my tax liability?

The HMRC can question the application as it's within their powers to do so. i.e. as a married couple what other reason would you have other than to reduce your income tax liability.

Not suggesting that they will for certain. Merely highlighting the possibility.