Rental income to one owner only

DWM345

My wife and I have been forced to buy a house and rent it to our daughter to prevent her and her three young children being evicted and moved to another part of the country. The children all have mental health issues resulting from the behaviour of their (useless/selfish/narcissist) father so the impact of eviction was inconceivable. This wasn't what we had planned for our retirement. It has swallowed up our savings and money is now tight. 

Our daughter works but does get housing benefit - which services the interest only mortgage that we had to take out on our own home. 

We want all of the rental income from the rental house to go to my wife for income tax purposes as I have significant pension income. Do I have to complete a Declaration of Trust and submit this to the Land Registry ?

Should the DoT specify 50/50 ownership and 100/0 for beneficial interest and expenses ?  That would mean I do not have to declare any income in my name. Do I have to provide the DoT to HMRC or just submit rental income and expenses on my wife's tax return ?

I assume we will still share any liability for CGT ? I would be happy to specify my wife as sole owner of the rental house but I assume that would be detrimental re CGT ?

A solicitor has quoted £850 for a DoT but I have seen that I can produce one online using Rocket Lawyer, what do I need to be particularly careful of ?

What else should I be worried about ? Please chip in with any helpful advice you may have. 

born_again

DWM345 said:

My wife and I have been forced to buy a house and rent it to our daughter to prevent her and her three young children being evicted and moved to another part of the country. The children all have mental health issues resulting from the behaviour of their (useless/selfish/narcissist) father so the impact of eviction was inconceivable. This wasn't what we had planned for our retirement. It has swallowed up our savings and money is now tight. 

Our daughter works but does get housing benefit - which services the interest only mortgage that we had to take out on our own home. 

We want all of the rental income from the rental house to go to my wife for income tax purposes as I have significant pension income. Do I have to complete a Declaration of Trust and submit this to the Land Registry ?

Should the DoT specify 50/50 ownership and 100/0 for beneficial interest and expenses ?  That would mean I do not have to declare any income in my name. Do I have to provide the DoT to HMRC or just submit rental income and expenses on my wife's tax return ?

I assume we will still share any liability for CGT ? I would be happy to specify my wife as sole owner of the rental house but I assume that would be detrimental re CGT ?

A solicitor has quoted £850 for a DoT but I have seen that I can produce one online using Rocket Lawyer, what do I need to be particularly careful of ?

What else should I be worried about ? Please chip in with any helpful advice you may have. 

Does she pay going rate for rent & have a proper tenancy agreement?
As these can be taken as a contrived rental, where family are involved.

https://www.housingrights.org.uk/professionals/news/universal-credit-decisions-contrived-tenancies

https://data.parliament.uk/DepositedPapers/Files/DEP2019-0465/Contrived_tenancies_v4.0.pdf

https://england.shelter.org.uk/professional_resources/legal/benefits/housing_benefit/housing_benefit_claimants_who_are_treated_as_not_liable_to_pay_rent

DWM345

She pays a full market rent and it is accepted by the benefits agency.

sheramber

You need to send a deed of trust and a completed form 17 to HMRC.

Details here

https://www.litrg.org.uk/savings-property/property-income/joint-income-property

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

https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9851

poseidon1

DWM345 said:

My wife and I have been forced to buy a house and rent it to our daughter to prevent her and her three young children being evicted and moved to another part of the country. The children all have mental health issues resulting from the behaviour of their (useless/selfish/narcissist) father so the impact of eviction was inconceivable. This wasn't what we had planned for our retirement. It has swallowed up our savings and money is now tight. 

Our daughter works but does get housing benefit - which services the interest only mortgage that we had to take out on our own home. 

We want all of the rental income from the rental house to go to my wife for income tax purposes as I have significant pension income. Do I have to complete a Declaration of Trust and submit this to the Land Registry ?

Should the DoT specify 50/50 ownership and 100/0 for beneficial interest and expenses ?  That would mean I do not have to declare any income in my name. Do I have to provide the DoT to HMRC or just submit rental income and expenses on my wife's tax return ?

I assume we will still share any liability for CGT ? I would be happy to specify my wife as sole owner of the rental house but I assume that would be detrimental re CGT ?

A solicitor has quoted £850 for a DoT but I have seen that I can produce one online using Rocket Lawyer, what do I need to be particularly careful of ?

What else should I be worried about ? Please chip in with any helpful advice you may have. 

You may well find the recent thread below of specific interest and directly bearing on your plan of action

https://forums.moneysavingexpert.com/discussion/comment/81736352#Comment_81736352

Bear in mind the advice against a DIY DOT, and in your case since you have a mortgage if this is not already in joint names , possible need for a subordination agreement with the mortgage lender.

Presumeably the gross rents are below the new £20k threshold for the new 'Make Tax Digital' compliance requirement rolling out next year, but note HMRC's intention to extend it to lower levels of landlord income in the future.

As regards CGT planning with only £3000 annual exemption each, how you structure ownership is no longer a real issue. Maximum tax saving per person is only £720, assuming the highest CGT rate of 24%. 
The annual exemption having diminished from £12,300  to the present level, is therefore of little relevance.

DWM345

The rental property is Mortgage-free, we had to take out a mortgage on our own home.

I would like to identify the risks of a DIY DoT.

theartfullodger

Sorry to read your story.

re "" The rental property is rent-free ""   - So no rent paid by daughter at all??  Yet she claims some housing benefit (or UC housing element)?? (or did I misunderstand, if so apologies.??)

Humbly suggest you/her carefully check that there is not possibility of any such housing benefit payments reclaimed.  see..

https://england.shelter.org.uk/professional_resources/legal/benefits/housing_benefit/recovery_of_housing_benefit_overpayments

- I am of course not suggesting at all there was any intention of questionable claiming: (I'm in receipt of 6 benefits myself being old..)

Any training or education in being a landlord please??

btw most experienced landlords consider renting to friends or family unwise: Suggesting a very quick way of ruining relationship, although circumstances sometimes force matters.

Good luck, hope it works out.

Keep_pedalling

DWM345 said:

The rental property is rent-free, we had to take out a mortgage on our own home.

I would like to identify the risks of a DIY DoT.

I presume that is a typo and you ment mortgage free?

DWM345

Rent-free now corrected to Morgage-free. 

silvercar

Keep_pedalling said:

DWM345 said:

The rental property is rent-free, we had to take out a mortgage on our own home.

I would like to identify the risks of a DIY DoT.

I presume that is a typo and you ment mortgage free?

I would assume this too.

It doesn't matter where the mortgage is secured, the interest can still be considered to be as a result of buying the rental property. Though current regulations mean that the interest payments are restricted to the basic rate, they should still be included on your tax self assessment.

btw most experienced landlords consider renting to friends or family unwise: Suggesting a very quick way of ruining relationship, although circumstances sometimes force matters.

I would agree with you generally, but here the property was bought with the sole intention of helping out family.

freesha

Surely she is on UC not HB?