Property - 'Beneficial Interest' Spouse/Daughter HMRC

[BikeBikeBIke]

What evidence do HMRC need to see if the beneficial interest of a property is (for tax purposes) signed over to a spouse or child. Is there an FAQ on HMRCs site somewhere?

Can the owner have the revenue go straight to an account only he has access to? Will any management company need to deal direct with the beneficial interest person or can they carry on dealing with the owner?

TIA!

[Panamax]

If you're getting into this sort of thing you really need paid advice from a solicitor or other suitably qualified/experienced professional.

• Whenever a beneficial interest is separated from legal ownership the legal owner is holding the property "on trust" for the beneficial owner.
• For clarity/certainty that trust should be evidenced by a Deed of Trust.
• Under rules implemented a couple of years ago all trusts (including bare trusts) must register with HMRC and thereafter send an annual update. There are penalties for non-compliance. https://www.gov.uk/guidance/register-a-trust-as-a-...
• The finances of the beneficial owner should be kept entirely separate from the legal owner, otherwise the trust looks like a sham. The legal owner should either pass rent straight through to the beneficial owner (bare trust) or keep proper trust accounts of all income and outgoings with the net fund held for the beneficial owner.
• Unless it's a bare trust the trust is likely to taxable in its own right.

• It makes no difference who deals with day to day management of the property.

[BikeBikeBIke]

Panamax said:

If you're getting into this sort of thing you really need paid advice from a solicitor or other suitably qualified/experienced professional.

• Whenever a beneficial interest is separated from legal ownership the legal owner is holding the property "on trust" for the beneficial owner.
• For clarity/certainty that trust should be evidenced by a Deed of Trust.
• Under rules implemented a couple of years ago all trusts (including bare trusts) must register with HMRC and thereafter send an annual update. There are penalties for non-compliance. https://www.gov.uk/guidance/register-a-trust-as-a-...
• The finances of the beneficial owner should be kept entirely separate from the legal owner, otherwise the trust looks like a sham. The legal owner should either pass rent straight through to the beneficial owner (bare trust) or keep proper trust accounts of all income and outgoings with the net fund held for the beneficial owner.
• Unless it's a bare trust the trust is likely to taxable in its own right.

• It makes no difference who deals with day to day management of the property.

Many thanks. I spoke to a solicitor and they seemed woefully ignorant of the things the tax man would need to see. I guess I need to find some kind of tax specialist or a solicitor with more nouse.

Thanks again, that's massively helpful.

[BikeBikeBIke]

Thanks again, all.

So, I very spoken to an Tax Advisor and the idea is a go-er.

Is he supposed to give me the advice in writing? I've taken a lot of what he says at face value, if HMRC investigate me in 10 years time and he's got it wrong what comeback do I have?

[BikeBikeBIke]

Panamax said:

.

• Under rules implemented a couple of years ago all trusts (including bare trusts) must register with HMRC and thereafter send an annual update. There are penalties for non-compliance. https://www.gov.uk/guidance/register-a-trust-as-a-...
• The finances of the beneficial owner should be kept entirely separate from the legal owner, otherwise the trust looks like a sham. The legal owner should either pass rent straight through to the beneficial owner (bare trust) or keep proper trust accounts of all income and outgoings with the net fund held for the beneficial owner.
• Unless it's a bare trust the trust is likely to taxable in its own right.

None of this was mentioned by the tax advisor guy. He seemed to take the view that the money could go to my account and apart from the trust an one form I could retain everything in my name and simply transfer the tax to my wife.

He's a credible guy with an established tax advice business, but your version seems more credible to me.

I specifically asked if there was an annual report and he said no.

I'm getting slightly nervous.

Edited by BikeBikeBIke on Friday 7th February 13:27

[darreni]

Seek out someone who is STEP qualified.

[TownIdiot]

BikeBikeBIke said:

Thanks again, all.

So, I very spoken to an Tax Advisor and the idea is a go-er.

Is he supposed to give me the advice in writing? I've taken a lot of what he says at face value, if HMRC investigate me in 10 years time and he's got it wrong what comeback do I have?

You don't really get any cover for bad advice around tax. You might get the fees back (doubtful) but the tax is what it is.

[BikeBikeBIke]

TownIdiot said:

BikeBikeBIke said:

Thanks again, all.

So, I very spoken to an Tax Advisor and the idea is a go-er.

Is he supposed to give me the advice in writing? I've taken a lot of what he says at face value, if HMRC investigate me in 10 years time and he's got it wrong what comeback do I have?

You don't really get any cover for bad advice around tax. You might get the fees back (doubtful) but the tax is what it is.

Make me think I should just do the paperwork myself. At least if I make a mistake it will look accidental.

[TownIdiot]

BikeBikeBIke said:

Make me think I should just do the paperwork myself. At least if I make a mistake it will look accidental.

Depends what you are trying to hide. Or achieve.

Edited to add.
If the beneficial interest has passed over then it will be very easy to evidence.

Edited by TownIdiot on Friday 7th February 14:02

[Countdown]

BikeBikeBIke said:

What evidence do HMRC need to see if the beneficial interest of a property is (for tax purposes) signed over to a spouse or child. Is there an FAQ on HMRCs site somewhere?

TIA!

I don't know if this still applies but my wife and I completed Form 17 about 20 years ago when we wanted to transfer some properties wholly into her name.

https://www.gov.uk/government/publications/income-...

[BikeBikeBIke]

It's a bloody nightmare.

Form 17 appears to only apply if the property is already jointly held. Well it's 100pc mine. I want to retain the ownership and transfer the beneficial interest.

It's quite insane that the professionals (one solicitor, one tax guy) can't tell me clearly what the rules are. They must do this stuff all the time.

[TownIdiot]

BikeBikeBIke said:

It's a bloody nightmare.

Form 17 appears to only apply if the property is already jointly held. Well it's 100pc mine. I want to retain the ownership and transfer the beneficial interest.

It's quite insane that the professionals (one solicitor, one tax guy) can't tell me clearly what the rules are. They must do this stuff all the time.

Well it is a bit of an awkward one.
Far easier just to transfer it, anything else starts to initiate a sniff test.

Or just make sure you pass on all the income and be prepared for a grilling if they come knocking.

[BikeBikeBIke]

TownIdiot said:

BikeBikeBIke said:

It's a bloody nightmare.

Form 17 appears to only apply if the property is already jointly held. Well it's 100pc mine. I want to retain the ownership and transfer the beneficial interest.

It's quite insane that the professionals (one solicitor, one tax guy) can't tell me clearly what the rules are. They must do this stuff all the time.

Well it is a bit of an awkward one.
Far easier just to transfer it, anything else starts to initiate a sniff test.

Or just make sure you pass on all the income and be prepared for a grilling if they come knocking.

TBH none of this passes the sniff test, I'm amazed it's even allowed, but it clearly is as there's a specific mechanism to do it.

I'm not sure this is that unusual. They're all familiar with form 17, I'd have thought this was bread and butter to them.

Stop Press: I've just gone through "Form 17". It doesn't explicitly say you have to be joint owners on the deeds. I'm beginning to suspect that when they say you have to be "joint owners" they just use the term in the sense that spouses are essentially joint owners by virtue of being married. They only ask for sight of the Deed of Trust so I guess that's all they care about, surely if they cared about the formal ownership they'd ask to see that. Which would certainly explain why none of the pro advisors think there's a problem here. Not sure how I verify that.

TownIdiot said:

Or just make sure you pass on all the income and be prepared for a grilling if they come knocking.

Better to ask forgiveness than permission. TBH self assessment is so wooly that that I lose sleep as things are - bound to have got *something* wrong - so one more aspect of my tax return that causes unease not a major drama.

Edited by BikeBikeBIke on Friday 7th February 15:35

[TownIdiot]

Are you transferring purely for tax purposes?

And as supplementary question is into your spouse or child?

[Hill92]

Is there a mortgage on the property?

[BikeBikeBIke]

Hill92 said:

Is there a mortgage on the property?

Small one.

[BikeBikeBIke]

TownIdiot said:

Are you transferring purely for tax purposes?

And as supplementary question is into your spouse or child?

Tax reasons, yes. (Which I thought was illegal.)

Probably spouse, but child would work.

[TownIdiot]

BikeBikeBIke said:

TownIdiot said:

Are you transferring purely for tax purposes?

And as supplementary question is into your spouse or child?

Tax reasons, yes. (Which I thought was illegal.)

Probably spouse, but child would work.

It's not illegal as such.
But it will definitely leave you open to being accused of creating an artificial structure.
If it's joint names just pay the income into a joint account and put it on your wife's tax return.

Can't see the issue with that. But then I'm not a professional and that's not advice.

And if getting a knock from HMRC worries you, don't do it
If you are laissez faire about such things crack on.

[Hill92]

BikeBikeBIke said:

Hill92 said:

Is there a mortgage on the property?

Small one.

You should check the mortgage terms and conditions will permit this as well.

Unfortunately there are a number of 'tax advisors' selling scams that will land their clients with large tax bills and potentially criminal charges for mortgage fraud and tax evasion:

https://taxpolicy.org.uk/2023/09/13/property118/

https://taxpolicy.org.uk/2023/10/04/lt4f/

[BikeBikeBIke]

TownIdiot said:

It's not illegal as such.
But it will definitely leave you open to being accused of creating an artificial structure.
If it's joint names just pay the income into a joint account and put it on your wife's tax return.

Can't see the issue with that. But then I'm not a professional and that's not advice.

And if getting a knock from HMRC worries you, don't do it
If you are laissez faire about such things crack on.

On further googling I think you have to be "tenants in common" and I'm sole owner so I'd have to change more than just the beneficial ownership. Shocking that neither the Solicitor nor the Tax Advisor knew that. On an emotional level I am very reluctant to do that, even though in real terms it makes no difference.