Transfer of BTL property from one spouse to another - reduce tax bill

Eassenav

My husband has owned a leasehold flat since 1998 (we both lived in it from 1998 - 2001) and it has been rented out since 2001.
The deeds are in my husband's name only and there is no mortgage associated with the property (we remortgaged our main home in 2019 and took out extra to pay off the BTL mortgage).

My husband is a 40% tax payer and I am a basic tax payer.

He has completed a self assessment each year for the rental income and paid the appropriate amount of tax.

Are we able to transfer the deeds in to my name and make me liable for the tax instead?  Would SDLT or capital gains implications?  No money would be exchanged.

If we can, who do we need to involve to facilitate this?

Many thanks for any help that can be given.

Hasbeen

Google Declaration of trust.

https://www.accountingweb.co.uk/any-answers/transfer-rental-income-and-declaration-of-trust

Eassenav

thank you for the link.
So for the purposes of letting out the property he could do a DoT to me at 100% and only I would be liable for the tax on property rental income.  If we were to sell the property he would be liable for CGT at 100% which was his share of the ownership when he first acquired the property.
If the above is true I assume a solicitor would be best place to draw up the DoT and we get someone to witness it?

Hasbeen

Yes require solicitor.

Also I think there is one more HMRC form to send as well.

Forget the name but others will comment.

Jeremy535897

If your husband wants to transfer the property to you, it doesn't need a declaration of trust. What you need is a straightforward transfer, just like selling to a third party. A solicitor will do this. There is no HMRC form. The previous poster is probably thinking of form 17, which is only relevant to property jointly owned by couples as tenants in common.

There is no capital gains tax on transfers between spouses living together. The transferee inherits the transferor's base cost. At present part of the capital gain would be exempt as it was occupied by your husband as his main residence for three years. As you have had no interest in the property to date, and it is not your main residence now, you cannot inherit his period of occupation as a main residence, and as your period of occupation pre-dates your ownership, I don't think that can be taken into account. That means that the capital gain for you could be larger, but it may be possible to transfer the property back if you think you are likely to sell (care needs to be taken here).

If there is a mortgage on the property, that will have to be transferred to you, and that may cause practical issues. There could also be stamp duty to pay if the mortgage exceeded £500,000 (this figure falls for transfers after 31 March 2021).

Eassenav

thank you all for your replies.
There is no mortgage attached to the property, we paid it off last year with funds borrowed against our main home.  I have had no interest in the property other than that I lived there between 1998 and 2001 and contributed to bills (including the mortgage) but I wasn't listed on the mortgage.
Would we need to explain to HMRC why my husband is no longer getting the income and I am now?  I don't think you have to declare the address of the property that provides the rental income.
Thank you so much for your replies, it is very much appreciated.  It sounds like I need to engage the services of a surveyancing solicitor.

Hasbeen

As long as you engage an experienced solicitor who will advise you and create appropriate  paperwork for HMRC

oldbikebloke

Eassenav said:

Would we need to explain to HMRC why my husband is no longer getting the income and I am now?  I don't think you have to declare the address of the property that provides the rental income.
Thank you so much for your replies, it is very much appreciated.  It sounds like I need to engage the services of a surveyancing solicitor.

no you do not need to explain anything to HMRC, a tax return is a self assessment exercise.
- he stops declaring rental on his return
- you start declaring rental on your return

HMRC does nothing until it selects either tax return for "review" (randomly or because its computer doesn't like one of them).
The chances of that happening in any one tax year are slim. 
If it does happen, then your solicitor will have filed the change in ownership with the Land Registry so one nanosecond of computer time will be used to confirm that change and therefore that is all that is relevant re the change of beneficial entitlement to the income.

Do take note of the CGT implications as explained by Jeremy,

Hasbeen

OP It really depends on if you want to transfer ownership, deeds etc or just get a declaration to take rental to your name?
As advised speak to solicitor.

Jeremy535897

Hasbeen said:

OP It really depends on if you want to transfer ownership, deeds etc or just get a declaration to take rental to your name?
As advised speak to solicitor.

If husband merely transfers the right to receive rent to OP, the rent remains taxable on the husband. The ownership of the property must be transferred. The simplest and easiest way, and the one HMRC can easily check, is to do what I said and do a simple transfer of the title. I would also suggest that in the notes section on both SA returns it is stated that property X was transferred to/from spouse on (date) for nil consideration in box 19 of SA100.