Splitting CGT on property in sole maiden name

ElleCy

We are planning to sell the flat I bought pre marriage and have rented since marriage . We have always split the rental gain on our self assessments and wonder if we actually need to do a deed of assignment in order to split CGT liability on selling, given that HMRC have always allowed us to split the rental tax liability. I don’t want to spend money unnecessarily on deed if we don’t really need it. Thanks in advance for relevant answers.

_Penny_Dreadful

https://forums.moneysavingexpert.com/discussion/6656594/splitting-cgt-on-property-in-sole-maiden-name

If you’ve been the sole beneficial owner this whole time you shouldn’t have been splitting the rental income with your spouse, that’s tax evasion.

You can transfer beneficial ownership between spouses to share your CGT liability but you will need a declaration of trust.

poseidon1

As per @_ Penny_Dreadful

did you have a declaration of trust document in place as to the basis for your rental split for income tax purposes and was this supplied to HMRC? If not what document did you have in place that justified the rental split?

If HMRC are not on notice of any documented split in the beneficial ownership at the present time ( whether by declaration of trust or conveyance of a share of legal ownership) , then you must certainly have one in place prior to sale, if you want any taxable gain split between you.

Perhaps talk to the solicitor instructed to handle the disposal If they can put a declaration of trust in place prior to sale.

ElleCy

Thank for response. No tax evasion went on. We just did as the HMRC manual states.

“For income tax purposes, under S271 ITTOIA05 the person liable to income tax on the profits of a property business is “the person receiving or entitled to the profits”.

The test “receiving or entitled to the profits” also operates regardless of the form of ownership for land law purposes

S271 Income Tax (Trading and Other Income) Act 2005 (ITTOIA05)”

Even if only I had taken profits we would have paid same tax as not close to higher rate.
just wondering if it’s the same when we sell. Seems no one has a clear steer in this, so will re-read the HMRC guidance again to check.

It appears that lots of tax consultants and conveyancers are making a lot of money out of confusion.

poseidon1

https://forums.moneysavingexpert.com/discussion/comment/81897687#Comment_81897687

Clearly as a 'tax expert' you have evidently interpreted the legislation in a manner that suited your own wish to avoid paying for professional advice.

Having got that far in your rationalisation of what that legislation (and subsequent case law on the subject) actually meant you then chose not to delving any deeper into HMRC's forms and procedures in relation to taxation of joint income from land.

Had you been more diligent you would have found the following form in relation to spouse jointly owned income from property

https://www.tax.service.gov.uk/print-and-post/form/SpecPersTax_iForms/1.0/17/17.xdp

It might then have occured to you that if HMRC have a specific format that allow joint owners of property to formally alter their percentage split for income tax purposes, then they would certainly require a sole owner to demonstrate justification for not having all income attributed to them, if not by virtue of a formal transfer of title to another party, then at the very least a declaration of trust in favour of the other party.

However, clearly you know best and believe a mere oral declaratory statement without documented support, was all that was needed to alienate a portion of your rental stream to your spouse. No doubt that same 'research' will find similar support for an 'oral' allocation of property proceeds to your spouse for CGT purposes, when the time comes.

SDLT_Geek

https://forums.moneysavingexpert.com/discussion/comment/81897926#Comment_81897926

Masterly, devastating and backed up by other sources, including this: https://www.ukpropertyaccountants.co.uk/transferring-rental-income-to-wife-via-a-declaration-of-trust/

ElleCy

Thank you again. I am aware of form 17 used by couples who have joint ownership who may want to change split for tax advantage.

I will continue to do my research taking various suggestions into account and seek advice if best.