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FORM 17. Joint landlord Tax query

Started by Ian.s, March 07, 2017, 11:15:46 AM

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Ian.s

Hi,  Firstly I dont want anyone reading this to think ive ignorantly posted without trying to source an exact answer.  I've spoken directly to HMRC regarding tax implications for joint landlords and  read an endless amount of forum and online literature.

I have 1 BTL property as well as a normal p.a.y.e job  (40% tax payer).  The property is solely in my name (mortgaged)  but for the coming year I added my wife (20% tax payer) as a landlord.  After 15 mins on the phone with HMRC I was informed that we're allowed to split the income and expenses in whatever ratio we choose . I even asked if  my wife could fill out the self assessment and declare 100% of the rent to her. I was told this was fine ( to my suprise).
I believe it correct if the house was jointly in both our names we would be stuck to 50:50 by virtue of marriage. 
.
It wasnt mentioned to me by the fella at HMRC but ive since read about -Form17-  declaration of beneficial interest .  This is what im assuming allowes my wife to receive the rent even though its legally not her house.

Has anyone else LEGALLY navigated either the form17 or been in my situation?

Thanks Ian.

Simon Pambin

As I understand it, Form 17 only allows you to vary the proportions if the property is already in joint names. To get the property into joint names, you'd need to gift part of it to your wife, by means of a Declaration of Trust. This is a legal document in the form of a deed, which your friendly local solicitor should be able to draw up for a small fee (a couple of  hundred quid or so). You can then use Form 17 to assess the income from the property based on the split stipulated in the deed.


theangrylandlord

#2
Just to clarify whilst Simon is correct Form 17 can only be used in a joint tenancy (ownership) of the legal interest of the property it is still possible to make a declaration of trust when say in your position of sole ownership. 

To change the ownership of the property in order to be able to use Form 17 is rather putting the cart before the horse. 

You don't need to change the legal title to declare your spouse is the beneficial owner of the property.

It may not be obvious to everyone but there are two levels of "ownership" of property:
1. Legal title (the legal administration of the property)
2. Equitable title or beneficial interest (the use of the property)

Tax is based on the latter and there is no need to align the two.  If there are no express declarations things are presumed to be in equal shares of the legal interest holders hence the existence of Form 17 to rebut/override the assumption and establish a different beneficial interest.
Form 17 is very convenient but to change the legal title will incur other issues like inheritance and other tax issues etc. and so you need to consider more carefully before that step. 

You can still declare that your spouse should get xx% of the Rent based on her beneficial interest.  You need to document the declaration and have both parties sign under S53(1)(b) Law of Property Act 1925 (solicitor can help if you don't know how to do this) and there is no need to put a charge on the title register.

Best of luck