BTL joint income query

EdInvestor

If a married couple own a BTL on a 70/30 tenants in common basis, and elect to receive the income in the same proportion under Form 17, how does the Revenue want expenses apportioned?

Currently the property has a very small mortgage, which is in the name of the wife (currently the sole owner) who would be the 30% owner under the proposed change ( mortgage about 60% LTV on her 30% stake compared with about 20% now on 100%). The husband's 70% share would be funded wholly by invested capital.

Or is the income apportioned net of expenses?

TIA for any comments.

fengirl_2

As there is no such thing as a joint declaration for husband and wife, they each declare their own share of the rents received and claim the expenses each has paid personally, plus the appropriate proportion of any expenses paid jointly.

silvercar

So if one spouse recieves the rent by standing order but both spouses have written cheques for expense items, do you mean that one spouse will have a loss to carry forward and the other a profit? Or can spouses split everything equally?

silvercar

Thanks Jimmo, I thought that was the case, just wanted to check. We own the property 50:50 so I was assuming that all income and expenditure would be split 50:50 even though the income goes into the account that has the mortgage coming out and the other expenditure from whoever has most in their account at the time!

EdInvestor

jimmo wrote: »

For property income you really need to look at the profits of the letting business.
If you own the property 70/30 and are entitled to the income 70/30 you can split the profits 70/30
Nothing else is acceptable.
See http://www.hmrc.gov.uk/manuals/pimmanual/PIM1030.htm

Could I confirm how this would work on each tax return? Say the rental income is 10k p.a. The wife's share is 3k.She has a mortgage in her name only and she pays the whole of the interest of 2k a year.Other expenses are 1,200 p.a, of which she pays 30% apportioned to her share, ie 360.

So her profit on the business is 3000- 2360 = 640 and she pays tax on that.

The husband's share of the rental income is 7k.He has no mortgage but pays 70% of the other expenses, ie 1200-360 = 840, so his profit from the business is 6160 and he is taxed on that.

Is that correct?

Or do all expenses including the mortgage interest get deducted from the income first, with apportionment after that?

Murdina

basically you split all the income and expenses in the same ratio eg 70:30 so as to ensure that that way you end up splitting the profit that way too. It's not an unusual situation and a bit of a pain to have to apportion everything just to fill out the form. In some very limited cases you could use the partnership tax return but I would not really recommend trying that. What you cannot do is say that one party has some expenses that the other does not.

EdInvestor

OK, thanks all.