Rental property in my name only; can wife officially receive rent payments?

Edtough

Hi all,

I have a property in my name only, that I bought 5 years ago and am now renting out. For tax reasons, I would like my wife to become the landlady. First of all, in the eyes of the Inland Revenue, is my wife allowed to be the landlady of a property she doesn't own (but her husband does)?

Secondly, I am paying a small mortgage on the property. If the mortgage is in my name, can the wife use these payments as a tax deductable? And if not, can I remortgage so that the wife is the mortgage holder, again on a property she doesn't technically own?

Cheers guys.

noh

The beneficial owner of the property is liable for tax on the profit made.
A mortgage will only be granted to the registered owners.

holly_hobby

Rental income for married couples (where there is beneficial ownership) is always assumed by HMRC to be distributed on a 50/50 basis, unless directed otherwise.

Therefore if you want it reported under any other division (say 99/1 weighted in your wife's favour), you will need to formally advise HMRC of this via completion and submission of HMRC Form 17 (attached below).

NB - Although the property is in your sole name, as you are married and will be citing your wife to have additional beneficial ownership, AFAIK you won't be reqd to actually tsf legal title to her. As long as beneficial ownership can be illustrated of course (which is pretty simple for married couples, and would be such things as she benefits/shares the rent profits with you, she assists with the mangement and costs etc, etc) - which means that you only have to submit Form 17 to have the unequal rental division recorded by HMRC. (but please to confirm this with your own tax practioner or HMRC direct).

Mge Interest Deduction
You don't need to add Mrs to the mge to have the interest as a permitted deduction.

This is because the incurred mortgage interest is a costing or liability of the business - of which she is a beneficial owner. Which means that this outlay may be deducted from annual gross rental receipts as a permitted deduction, with you each reporting your net rental receipts for tax via 2 indvidual self assessment returns.

If you do wish to transfer legal ownership (title) to her and own this jointly, this is referred to as a Transfer of Equity (circa £500 legal cost). And she will have to satisfy the status checks of the lender (which IF this a BTL mortgage as oppossed to a consent to let arrangement, will essentially centre around her having a clean credit record - as you have already met the mininmun income requirements the BTL lender may have).

Again, if owned jointly by a married couple (ie you are both named as joint legal owners) HMRC will presume the rent is also split 50/50. To manage this, you would effect your transfer of ownership under a Tenants In Common arrangement (which permits unequal legal/equittible ownership), and weight ownership under your wife, in the identical proportions you also wish to report your net rental receipts for tax (ie 99/1 etc) - again supported by HMRC Form 17.

HMRC Form 17 - http://www.hmrc.gov.uk/forms/form17.pdf

Your own tax practitioner and/or HMRC will guide.

Hope this helps

Holly x

antrobus

holly_hobby wrote: »

Rental income for married couples (where there is beneficial ownership) is always assumed by HMRC to be distributed on a 50/50 basis, unless directed otherwise.....

It's always assumed to be 50:50 where the property is in joint ownership. Or in HMRC speak; Income from property held jointly by married couples and civil partners is treated as beneficially owned by the individuals in equal shares under ITA/S836.

http://www.hmrc.gov.uk/MANUALS/tsemmanual/TSEM9814.htm

That is not the case with the OP where the property is in his sole ownership. Or as HMRC put it: Joint ownership is not in point here. The property is not held 'in joint names', so ITA/S836 (TSEM9814) is not relevant.

http://www.hmrc.gov.uk/MANUALS/tsemmanual/tsem9923.htm

If the OP wants the rental income to be taxed as his wife's income he is going to have to make her the sole or at least joint legal owner of the property.

Of course, as allways, one should be prepared to pay a real professional in order to get proper advice.:)