Gifting property to spouse

SSG79

AdrianC wrote: »

So to cut that all down to the pertinent facts...

You jointly own a house, with a joint-names mortgage.
You want to transfer it all to your wife's name so you can put the entire letting income onto her tax return.

The rest is irrelevant.


And the answer is still "Will she be able to get a BtL mortgage on it in her sole name?"

I'm genuinely not sure, I would need to get in touch with the mortgage company (Bank of Ireland / Post Office). Appreciate you distilling down, thank you.

SSG79

Sibbers123 wrote: »

You need professional advice.

You can't just make a declaration of trust - it has to actually be factual. I would want to see all of the rental income and expenses being paid in/out of the beneficiaries bank account at the very least. If you make a deceleration of trust which doesn't represent the true picture and split the property income on that basis - you will essentially be committing fraud.

As a married couple you will only be entitled to PPR relief on one property between both of you.

The SDLT issue will differ greatly depending on whether you transfer the property before or after you purchase the new property.

You will be paying the SDLT surcharge on the purchase of your new property.

These are just the tax implications - as above, you need to ask the bank for permission to do this as well as the banks permission to let the property out. Also, with a fairly large mortgage, it might be hard to make any sort of profit especially if you get some bad tenants.

Hi, the declaration of trust would be legit. Wife would take all the money in her own account and similarly would be responsible for whole mortgage. Similarly, I would be wholly responsible for my PPR, the house we're moving to (100% owned by me).

No SDLT as I own this already, but thanks for flagging. Not sure the house were moving to can be wife's PPR, she doesn't own it!!

Good point re tenants, all to weigh up

SSG79

RedFraggle wrote: »

Will your wife pass affordability on the mortgage on her own?

I suspect it'll be touch and go. Hence I was thinking of only transferring her 45% so I could stay on mortgage? She would still pay 95% or mortgage and take 95% of income, so wouldn't be dishonest in this regard.

SSG79

Appreciate all the helpful suggestions and questions, thank you.

00ec25

stefangunn wrote: »

Hi, the declaration of trust would be legit. Wife would take all the money in her own account and similarly would be responsible for whole mortgage. Similarly, I would be wholly responsible for my PPR, the house we're moving to (100% owned by me).

No SDLT as I own this already, but thanks for flagging. Not sure the house were moving to can be wife's PPR, she doesn't own it!!

Good point re tenants, all to weigh up

hmmmm...

DoT and Form 17
yes the DoT becomes the evidence to support the Form 17. However, as it was the marital main home of both of you, it would be very bad tax planning to make her sole owner, since you would then lose your claim to PRR so her overall CGT bill would be higher when she sells. And if she tries to make you once more a co-owner at a later date, you can't get back your previous PRR.
You must hold at least 1%

mortgage
her being responsible for the whole mortgage is likely not going to be possible from the lender's perspective since they still require minimum incomes even on BTL mortgages. Better to keep it a joint mortgage

main residence
no she cannot declare it as her main residence when it is a) not available to be used as a residence because it is let to a tenant as their main home and b) you are married so can only have one between you, which must be the same for both of you, ie the house you will live in and own in your sole name.

CGT
CGT is based on beneficial, not legal, ownership. Form 17 and the DoT details the beneficial ownership so it is vital that you each have a share so you each can claim PRR and letting relief against your respective shares. You can of course increase your share closer to when you sell (but not too close or it will be ignored) and in the meantime hold only enough to do whatever is best in terms of income tax for you and her

stefangunn wrote: »

I suspect it'll be touch and go. Hence I was thinking of only transferring her 45% so I could stay on mortgage? She would still pay 95% or mortgage and take 95% of income, so wouldn't be dishonest in this regard.

NOPE that would not be allowed since you cannot have a different income share to that which relates to a concrete mortgage split such as you imply.
Normally mortgages are joint and several liability (which is often incorrectly called 50/50). If you try to get a specific % attached to her compared to you, then that is her beneficial ownership and she cannot then claim more than that as her rental income share.

SSG79

00ec25 wrote: »

hmmmm...

DoT and Form 17
yes the DoT becomes the evidence to support the Form 17. However, as it was the marital main home of both of you, it would be very bad tax planning to make her sole owner, since you would then lose your claim to PRR so her overall CGT bill would be higher when she sells. And if she tries to make you once more a co-owner at a later date, you can't get back your previous PRR.
You must hold at least 1%

mortgage
her being responsible for the whole mortgage is likely not going to be possible from the lender's perspective since they still require minimum incomes even on BTL mortgages. Better to keep it a joint mortgage

main residence
no she cannot declare it as her main residence when it is a) not available to be used as a residence because it is let to a tenant as their main home and b) you are married so can only have one between you, which must be the same for both of you, ie the house you will live in and own in your sole name.

CGT
CGT is based on beneficial, not legal, ownership. Form 17 and the DoT details the beneficial ownership so it is vital that you each have a share so you each can claim PRR and letting relief against your respective shares. You can of course increase your share closer to when you sell (but not too close or it will be ignored) and in the meantime hold only enough to do whatever is best in terms of income tax for you and her

NOPE that would not be allowed since you cannot have a different income share to that which relates to a concrete mortgage split such as you imply.
Normally mortgages are joint and several liability (which is often incorrectly called 50/50). If you try to get a specific % attached to her compared to you, then that is her beneficial ownership and she cannot then claim more than that as her rental income share.

Massively useful, thank you. Sounds like I'm a bit snookered then...!
1) I should always maintain a share, however small (it can be increased in future again), to minimise future CGT;
2) PPR, feels like this is an absolute no no, thanks.
3) Mortgage. The fact my wife can't have the mortgage alone means I can't gift her, say, 45% (so she owns 95%) as the 'joint and severally liable' point overrides, this we need to share 50:50 of the rental income...!

Is there no way she's able to take the lion's share of the rental income via a gifting process (if we both need to stay on mortgage)?

Cheers.
S

00ec25

stefangunn wrote: »

1) I should always maintain a share, however small (it can be increased in future again), to minimise future CGT;

YES
essential that you retain an ownership share (however small) because once you cease to be an owner, your previous entitlement to PRR (and hence LR when let) can never be recovered

stefangunn wrote: »

2) PPR, feels like this is an absolute no no, thanks.

not sure I understand this comment

the 260k mortgage house (house A) was your marital main home and as long as you remain a part owner that position will be locked in history and cannot be denied

the new house you are she are moving to (house will be your (replacement) PPR for BOTH of you due to the marriage rule. That also cannot be denied, since it is the reality of your situation: B is lived in, A is let and is not available to be lived in so cannot be a PPR

Forget any idea of there being a his and a hers house. That is absolutely wrong in PPR terms when married

stefangunn wrote: »

3) Mortgage. The fact my wife can't have the mortgage alone means I can't gift her, say, 45% (so she owns 95%) as the 'joint and severally liable' point overrides, this we need to share 50:50 of the rental income...!

Is there no way she's able to take the lion's share of the rental income via a gifting process (if we both need to stay on mortgage)?

I may have miswritten or misunderstood?

I read it that you intended for her to have a specified % of the mortgage. That would create a corresponding beneficial ownership %

if on the other hand, you do not create a specific %, but simply leave it as joint and several, then your DoT and Form 17 are the only documents which matter, since only they set out the income share for tax purposes. How a joint and several mortgage is paid between the two of you is irrelevant in that context.
She may well pay more of the mortgage than you in reality, but on paper that does not alter the fact that each of you is jointly liable for 100% of the whole mortgage - that is the true definition of joint and several. There is no defined share, each person is liable for everything, so you cannot be held to have split the rental in accordance with the mortgage, since there is no mortgage split. the only split in reality is therefore what the DoT says is the case

Not sure why you are obsessed with her needing to "take over" part of the mortgage, particularly given it is unlikely she will meet the affordability criteria on her own anyway.

SSG79

00ec25 wrote: »

YES
essential that you retain an ownership share (however small) because once you cease to be an owner, your previous entitlement to PRR (and hence LR when let) can never be recovered

Great, thank you

00ec25 wrote: »

not sure I understand this comment

the 260k mortgage house (house A) was your marital main home and as long as you remain a part owner that position will be locked in history and cannot be denied

UNDERSTOOD AND AGREED

00ec25 wrote: »

the new house you are she are moving to (house will be your (replacement) PPR for BOTH of you due to the marriage rule. That also cannot be denied, since it is the reality of your situation: B is lived in, A is let and is not available to be lived in so cannot be a PPR

PERFECT, THANKS.

00ec25 wrote: »

Forget any idea of there being a his and a hers house. That is absolutely wrong in PPR terms when married

THANKS FOR CLEARING UP

00ec25 wrote: »

I may have miswritten or misunderstood?

I read it that you intended for her to have a specified % of the mortgage. That would create a corresponding beneficial ownership %

if on the other hand, you do not create a specific %, but simply leave it as joint and several, then your DoT and Form 17 are the only documents which matter, since only they set out the income share for tax purposes. How a joint and several mortgage is paid between the two of you is irrelevant in that context.

I SEE, SO WE CAN RETAIN MORTGAGE IN BOTH NAMES, YET I CAN STILL STATE THE SPLIT OF INCOME IN THE DOT. I THOUGHT I WOULDNT BE ABLE TO DO THAT, BUT IT APPEARS THAT WE CAN... PENNY DROPS!!

00ec25 wrote: »

She may well pay more of the mortgage than you in reality, but on paper that does not alter the fact that each of you is jointly liable for 100% of the whole mortgage - that is the true definition of joint and several. There is no defined share, each person is liable for everything, so you cannot be held to have split the rental in accordance with the mortgage, since there is no mortgage split. the only split in reality is therefore what the DoT says is the case

Not sure why you are obsessed with her needing to "take over" part of the mortgage, particularly given it is unlikely she will meet the affordability criteria on her own anyway.

REALLY HELPFUL, THANK YOU.