Adding wife to Buy to Let: Stamp Duty...

lovinituk

TrickyDicky101 wrote: »

The declaration is for tax purposes. The basis of the declaration would be the Tenants in Common Deed of Trust.

No its not. The default is 50-50 for a married couple even if the TiC says something else, unless you declare otherwise

*edit* the basis of the declaration appears to be a “Declaration of beneficial interests in joint property”, which is HMRC form 17.

TrickyDicky101

lovinituk wrote: »

No its not. The default is 50-50 for a married couple even if the TiC says something else, unless you declare otherwise

*edit* the basis of the declaration appears to be a “Declaration of beneficial interests in joint property”, which is HMRC form 17.

I'm out- arguing is pointless. OP can split income 99:1 if he so chooses. How would that be justified if HMRC questioned why it wasn't 50:50 - the DoT in the TiC. How would he declare this to HMRC - via the form you quote.

xylophone

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

http://www.taxcafe.co.uk/resources/stampdutytrap.html

may be worth a look.

HappyMJ

Another thought...

Could you transfer the entire property into your wife's name? The consideration being just enough to clear the mortgage.

She would then without a doubt have 100% of the income and capital gains in her name so instead of you paying 28% of the gains she would pay 18%.

lovinituk

TrickyDicky101 wrote: »

I'm out- arguing is pointless. OP can split income 99:1 if he so chooses. How would that be justified if HMRC questioned why it wasn't 50:50 - the DoT in the TiC. How would he declare this to HMRC - via the form you quote.

Can you link to something that backs up your understanding?

I'm not arguing - I am in a similar position and would like to make the income from my wifes flat 50-50 for tax purposes without splitting the property 50-50. That article and others I have read recently seem to suggest that even if the property is split 99-1, the income would still be split 50-50 for tax purposes, without having to make any further declarations.

If you have evidence to the contrary I would be interested as it may determine what we do next.

roadweary

xylophone wrote: »

https://www.gov.uk/guidance/sdlt-transferring-ownership-of-land-or-property

http://www.taxcafe.co.uk/resources/stampdutytrap.html

may be worth a look.

It all sounds like stamp duty applies, other than this paragraph which has no further information and isn't backed up by the other article:

If the larger share is given outright as a gift
If you take a bigger share but don’t pay anything in return, there’s no ‘consideration’ given including taking on liability for a mortgage. You won’t pay SDLT, even if the value of the extra part of the share is more than the SDLT threshold. You don’t need to tell HMRC about the transaction.

lovinituk

HappyMJ wrote: »

Another thought...

Could you transfer the entire property into your wife's name? The consideration being just enough to clear the mortgage.

She would then without a doubt have 100% of the income and capital gains in her name so instead of you paying 28% of the gains she would pay 18%.

But wouldn't future gains then be calculated on a 'starting' value of the consideration, therefore future capital gains tax could be much higher?

booksurr

lovinituk wrote: »

Can you link to something that backs up your understanding?

I'm not arguing - I am in a similar position and would like to make the income from my wifes flat 50-50 for tax purposes without splitting the property 50-50. That article and others I have read recently seem to suggest that even if the property is split 99-1, the income would still be split 50-50 for tax purposes, without having to make any further declarations.

If you have evidence to the contrary I would be interested as it may determine what we do next.

lot of hot air being expended in this thread arguing over what can be checked definitively by reading the correct HMRC webpages...

1. where property is jointly owned for LEGAL purposes it matters if it is joint tenancy as you cannot do anything other than remain 50/50.
http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9850.htm
If it is tenancy in common you can vary that as follows:

2. for tax purposes income of married (not unmarried) legal owners must be split 50/50 UNLESS a declaration is made to register a different share

3. the declaration is made via a FORM 17. The form must be supported by evidence that there is an unequal BENEFICIAL INTEREST split . Beneficial interest is a different concept to legal interest.

4 beneficial interest can be shown by:
- either the property is already owned as TIC and there is already a declaration of trust establishing set % of each owner. The declaration therefore says that those % are also be used as the beneficial share

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9851.htm
- OR an extra declaration of trust is done, specifically establishing a precise beneficial share split for the purposes of sharing the rental income. This has no effect on the underlying TIC legal ownership and indeed does not need to match it.

in the context of BTL note that when the property is finally sold the CGT liability will be split according to beneficial share, not legal share

https://www.gov.uk/government/publications/income-tax-declaration-of-beneficial-interests-in-joint-property-and-income-17



http://www.hmrc.gov.uk/manuals/tsemmanual/TSEM9520.htm

http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9856.htm

roadweary

Hi booksurr,

I'm on my phone right now but will check those links later.

A major related concern for me is Stamp Duty. The HMRC site isn't clear to me. Most examples of adding a spouse suggest stamp duty as payable- and those that don't are using the residential brackets whereas the BTL ones are now much harsher.

However there is a paragraph that suggests I CAN "gift" an amount of ownership to my wife. But no detail on how.

Would you be able to help?

HMRC:
If the larger share is given outright as a gift
If you take a bigger share but don’t pay anything in return, there’s no ‘consideration’ given including taking on liability for a mortgage. You won’t pay SDLT, even if the value of the extra part of the share is more than the SDLT threshold. You don’t need to tell HMRC about the transaction.

booksurr

SDLT
- the property is mortgaged
- liability on a mortgage is joint and several. It is not based on underlying ownership shares
- the mortgage is 120k. so your wife is deemed to be liable for half of that even if she does not legally own half the peoperty
- the consideration given is therefore half of the o/s mortgage (60k)
- 60k is > the minimum threshold below which higher rate SDLT does not apply (40k) so she will need to pay SDLT on 60k (based on your figures)