Process of declaring beneficial ownership on a rental prop
Process of declaring beneficial ownership on a rental prop
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fergus

Original Poster:

6,430 posts

305 months

Friday 1st February 2013
quotequote all
If my partner pays a lower marginal tax rate than I do, I understand I am able to tranfer beneficial (not legal) ownership of some rental properties into her name?

What form does the "notice" take, is it setup as a trust, or a deed, can it have an expiry date on it, etc?

What is the process to do this, and who needs to be informed other than HMRC? I had a quick look at http://www.hmrc.gov.uk/manuals/tsemmanual/tsem9150... but am none the wiser!

e.g.
Mortgage provider?
Land Registry?
Buildings insurer?

Will HMRC send acknowledgement, etc?

thks

sumo69

2,164 posts

250 months

Friday 1st February 2013
quotequote all
Lets start with the basics - is your "partner" your wife or someone else?

David

fergus

Original Poster:

6,430 posts

305 months

Friday 1st February 2013
quotequote all
sumo69 said:
Lets start with the basics - is your "partner" your wife or someone else?

David
Not married, but we live together and have children, etc.

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
Does anyone have any experience of declaring beneficial ownership on a rental to HMRC?

Newc

2,195 posts

212 months

Monday 4th February 2013
quotequote all
Are you trying to claim that you (an individual) are the registered owner of a property which is generating rental income but that your partner (an individual, to whom you are not married) is actually the beneficiary of the rents and should be paying tax on them rather than you ?

You've got two hopes...


The HMRC link you give refers to the use of trustee ownership for assets. Unless you are talking about six figure rental income streams the costs in establishing and managing that kind of setup will vastly exceed any personal income tax savings.

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
Newc said:
Are you trying to claim that you (an individual) are the registered owner of a property which is generating rental income but that your partner (an individual, to whom you are not married) is actually the beneficiary of the rents and should be paying tax on them rather than you ?

You've got two hopes...


The HMRC link you give refers to the use of trustee ownership for assets. Unless you are talking about six figure rental income streams the costs in establishing and managing that kind of setup will vastly exceed any personal income tax savings.
Yes. I have several friends who have done this (although are married), through their accountants for either single or double instances of rental properties.

I'm not sure what difference not being married makes, assuming we are "common law" partners?

Per the example on the HMRC link, I'm not sure what "costs" are involved other than the simple declaration?

Eric Mc

125,705 posts

295 months

Monday 4th February 2013
quotequote all
The concept of "common law" partners, marriage etc does not exist in English Law.

In the eyes of the law, the default situation is that the two of you are complete strangers.

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
Eric Mc said:
The concept of "common law" partners, marriage etc does not exist in English Law.

In the eyes of the law, the default situation is that the two of you are complete strangers.
Is there anything exempting me from transfering beneficial (not legal) ownership of an asset, to a non related person?

The HMRC site is not clear on this as far as I can tell.

Newc

2,195 posts

212 months

Monday 4th February 2013
quotequote all
HMRC is perfectly clear on it, as was Eric and as I attempted to be earlier. Repeating the question because you don't like the answer doesn't change the situation.

You are not married. There is therefore no connection between you and your partner on the tax situation of ownership in HMRC's eyes. Your married friends are setting up tenants in common arrangements, which they can do because they are married.

You cannot 'transfer beneficial ownership while retaining title' to an individual. There's no such construct. If there was, do you think anyone anywhere would be paying 50% UK tax ?

Use of active trust structures is a complex and expensive business with a set of taxes and charges all of their own, and all sorts of gotchas around what you can and can't do with the assets.

Edited by Newc on Monday 4th February 12:36

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
Newc said:
HMRC is perfectly clear on it, as was Eric and as I attempted to be earlier. Repeating the question because you don't like the answer doesn't change the situation.

You are not married. There is therefore no connection between you and your partner on the tax situation of ownership in HMRC's eyes. Your married friends are setting up tenants in common arrangements, which they can do because they are married.

You cannot 'transfer beneficial ownership while retaining title' to an individual. There's no such construct. If there was, do you think anyone anywhere would be paying 50% UK tax ?

Use of active trust structures is a complex and expensive business with a set of taxes and charges all of their own, and all sorts of gotchas around what you can and can't do with the assets.

Edited by Newc on Monday 4th February 12:36
I hadn't repeated the question, due to "not liking the answer", but more to gain clarity, which you have now kindly provided. Neither of the answers previously answered this question, but perhaps alluded to it.

Where a property is owned between tenants in common, (like our current house), is there anything to prevent beneficial title being transferred to one of the "tenants" (even when not married)?

If the flats were transfered into joint ownership, would this allow for the process of then transfering beneficial ownership? This is a genuine, rather than facetious question!

HMRC Trusts and Estates in Edinburgh are getting back to me shortly.

Newc

2,195 posts

212 months

Monday 4th February 2013
quotequote all
fergus said:
Newc said:
HMRC is perfectly clear on it, as was Eric and as I attempted to be earlier. Repeating the question because you don't like the answer doesn't change the situation.

You are not married. There is therefore no connection between you and your partner on the tax situation of ownership in HMRC's eyes. Your married friends are setting up tenants in common arrangements, which they can do because they are married.

You cannot 'transfer beneficial ownership while retaining title' to an individual. There's no such construct. If there was, do you think anyone anywhere would be paying 50% UK tax ?

Use of active trust structures is a complex and expensive business with a set of taxes and charges all of their own, and all sorts of gotchas around what you can and can't do with the assets.
I hadn't repeated the question, due to "not liking the answer", but more to gain clarity, which you have now kindly provided. Neither of the answers previously answered this question, but perhaps alluded to it.

Where a property is owned between tenants in common, (like our current house), is there anything to prevent beneficial title being transferred to one of the "tenants" (even when not married)?

If the flats were transfered into joint ownership, would this allow for the process of then transfering beneficial ownership? This is a genuine, rather than facetious question!

HMRC Trusts and Estates in Edinburgh are getting back to me shortly.
Apologies if I was snippy, I’m a tad jet lagged today.

Your suggestions require a trust in the middle. They are probably all viable and legal, but I don’t have enough knowledge of trusts to comment in detail. I can’t stress enough though that you are going down a very complex route.

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
Thks for replying.

This link suggests all may not be lost (re the unmarried persons bit): http://www.rossmartin.co.uk/index.php/land-a-prope...

Countdown

49,519 posts

226 months

Monday 4th February 2013
quotequote all
Apologies for thread hijack....

I assume there's no problem transferring beneficial ownership to a spouse?

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
I think this form will suffice in this instance: http://www.hmrc.gov.uk/forms/form17.pdf

sumo69

2,164 posts

250 months

Monday 4th February 2013
quotequote all
I was intending to post back on this thread earlier but didn't see that the OP had replied to my initial query.

As others have alluded, the basic fact is for tax purposes you are strangers in which case any transfer of ownership would be deemed by HMRC to be at "open market value" and not at a "no gain/loss value" which it is for inter-spouse transfers.

So you would be in a position that Capital Gaibs Tax would be paid on any "gain" albeit you are not in receipt of any funds.

Additionally, the transfer is a PET for IHT purposes and would become chargeable if you died within 7 years.

Form 17 doesn't effect the liability arising on you because of your non-married status - read the first line at the top of the commentary!

David

Edited by sumo69 on Monday 4th February 13:33

Eric Mc

125,705 posts

295 months

Monday 4th February 2013
quotequote all
Countdown said:
Apologies for thread hijack....

I assume there's no problem transferring beneficial ownership to a spouse?
No problems as such but there are a number of legal hoops you will need to jump through and you would almost definitely incur some legal fees.

fergus

Original Poster:

6,430 posts

305 months

Monday 4th February 2013
quotequote all
sumo69 said:
I was intending to post back on this thread earlier but didn't see that the OP had replied to my initial query.

As others have alluded, the basic fact is for tax purposes you are strangers in which case any transfer of ownership would be deemed by HMRC to be at "open market value" and not at a "no gain/loss value" which it is for inter-spouse transfers.

So you would be in a position that Capital Gains Tax would be paid on any "gain" albeit you are not in receipt of any funds.

Additionally, the transfer is a PET for IHT purposes and would become chargeable if you died within 7 years.

Form 17 doesn't effect the liability arising on you because of your non-married status - read the first line at the top of the commentary!
David, thanks for the reply. Does the GCT liability you allude to above arise in instances of change of beneficial, rather than legal, ownership?

Notwithstanding the first few lines on the top of form17, if I were to create a declaration of trust to transfer 100% of the beneficial ownership to someone else, could I then use form 17 to declare this fact to HMRC?

Numpty2001

1 posts

107 months

Wednesday 15th November 2017
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I know this is an old thread but Dad is in a care home could I declare beneficial interest as his rent already goes into an account in my name? It will help his tax situation out!

Eric Mc

125,705 posts

295 months

Wednesday 15th November 2017
quotequote all
Do you want your dad to incur a Capital Gains Tax liability?

Is he cuerrently declaring the income being generated by the rent - and paying the tax arising?

Is he using the funds being generated to help pay for his care home costs?

Is he a basic rate taxpayer?

Are YOU a basic rate taxpayer?

What about Inheritance Tax?