PIM1030 - Introduction: jointly owned property question

gallygirl

Sorry for length of this!

PIM1030 - Introduction: jointly owned property & partnerships

Jointly owned property - no partnership

Where there is no partnership, the share of any profit or loss arising from jointly owned property will normally be the same as the share owned in the property being let. But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property. The share for tax purposes must be the same as the share actually agreed.

Looking for advice please based on the above.

The situation re our btl's is:
Property 1 - owned by OH (not married)
Property 2 - owned by me
Property 3 - owned by OH
Property 4 - jointly owned, no income as family member in place but eventually will be income generating
Property 5 - being purchased jointly by sale of property 1 (just below CGT)
Property 6 - tenants in common, own house.

At present we pay tax on own properties (& pretty minimal as voids, mortgage interest and a few expensive years of repairs), going forward we will be putting all property in joint names (will be minimal CGT if any).

I am a higher rate tax payer, OH is also but about to retire v early (:mad::rotfl:). Plan is hopefully I will retire next year (:T) and we will let out property 6, spending most of our time overseas (but still classed as UK residents for tax).

2014/15 both higher rate tax payers
2015/16 I will be higher rate, OH basic but would be higher if pension income split evenly.
2016/17 both basic rate, but OH would be higher if pension income split evenly.

I will not have a pension for a good few years and that will be much lower than OH's. We want all the pension income to be treated as mine - not just tax wise, but actually going into my pocket - it's my reward for finding them and running them all these years. Cleaning filthy ovens & toilets and decorating over Xmas hols has paid off .

Do we actually need to put anything in writing to put this in place?

Is there any further guidance?

It will actually be costing us money in 2015/16, but saving us money going forward - is this likely to be a problem?

If this is something done unofficially between us to suit ourselves then could we allocate more to OH on 2015/15 then revert to all mine afterwards?

Thanks.

xylophone

I would strongly suggest that you and the OH take professional advice concerning CGT, IHT and personal taxation.

A STEP solicitor might be a start - he/she should be able to suggest other appropriate professionals ( tax accountant/IFA etc).

http://www.step.org/online-directory

Or see http://www.unbiased.co.uk/

gallygirl

Thanks, though we have very small capital gains and as the gain is only being realised on 1/2 the property we'll be ok.

We've been looking for a financial adviser but need a few things established so we know which angle to explore first. My OH is very anti trusts etc so I need to gather my thoughts before convincing him! I know unbiased is the way to go probably, to be honest though the financial advisers we've seen in the past haven't filled us with confidence (the last one didn't know about the cap on statutory redundancy :eek:).

I should probably have simplified things by simply asking:
Is there any guidance on assigning rental income between an unmarried couple?

uknick

OP, when you say split pension income; do you mean rental income?

gallygirl

uknick wrote: »

OP, when you say split pension income; do you mean rental income?

Doh, yes .

zygurat789

I think you should read up on Form 17. But beware, the capital gain will also follow the income split and I'm not sure how easy it is to reverse the descision.

antrobus

zygurat789 wrote: »

I think you should read up on Form 17. But beware, the capital gain will also follow the income split and I'm not sure how easy it is to reverse the descision.

The whole point is that PIM1030 states "But joint owners can agree a different division of profits and losses and so occasionally the share of the profits or losses will be different from the share in the property."

See; How to avoid landlord tax by splitting your rental income
http://www.lawpack.co.uk/landlord-and-tenancy/managing-your-tenancy/articles/article1824.asp

booksurr

zygurat789 wrote: »

I think you should read up on Form 17. But beware, the capital gain will also follow the income split and I'm not sure how easy it is to reverse the descision.

OP is not married - Form 17 is therefore irrelevant

for unmarried property owners each person must have a share of the legal ownership in order to be entitled to a share of the income but the split can be in any % (the beneficial ownership split) they agree between them , it does (Edit) NOT (see #12 below!!!!!) have to mirror the legal ownership split. This is best supported by a written declaration confirming the split

you are however correct to warn against the CGT implications since the beneficial ownership % will set the CGT exposure and changing that would count as a disposal between connected persons and so trigger a CGT calculation since the only people able to transfer tax free are a married couple

zygurat789

booksurr wrote: »

OP is not married - Form 17 is therefore irrelevant

for unmarried property owners each person must have a share of the legal ownership in order to be entitled to a share of the income but the split can be in any % (the beneficial ownership split) they agree between them , it does have to mirror the legal ownership split. This is best supported by a written declaration confirming the split

you are however correct to warn against the CGT implications since the beneficial ownership % will set the CGT exposure and changing that would count as a disposal between connected persons and so trigger a CGT calculation since the only people able to transfer tax free are a married couple

Sometimes the good tax advice is "get married".

antrobus

booksurr wrote: »

OP is not married - Form 17 is therefore irrelevant

for unmarried property owners each person must have a share of the legal ownership in order to be entitled to a share of the income but the split can be in any % (the beneficial ownership split) they agree between them , it does have to mirror the legal ownership split. This is best supported by a written declaration confirming the split ....

PIM1030 specifically states that you can have a "different division of profits and losses" so that "the share of the profits or losses will be different from the share in the property" i.e. the income shares do not have to follow the legal ownership split.

booksurr wrote: »

...you are however correct to warn against the CGT implications since the beneficial ownership % will set the CGT exposure and changing that would count as a disposal between connected persons and so trigger a CGT calculation since the only people able to transfer tax free are a married couple

OP states that "going forward we will be putting all property in joint names (will be minimal CGT if any)" so presumably they are already aware of, and have considered the CGT implications.

zygurat789 wrote: »

Sometimes the good tax advice is "get married".

And sometimes it would be 'don't get married'. Tax is funny that way.:)

gallygirl

Many thanks for all the advice. We will be taken professional advice but want to do our own research first - will read up on what you have mentioned.

Zyg - even with 95% tax relief that wouldn't be happening :rotfl:.

Feeling very fortunate to be in this position :T.