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Why choose HGH?

Investment property transfer

Posted: 16th Jan 2020 by Robert Salenius Investment Property, Taxation

For over 1.5 million Brits, their future financial hopes and aspirations are pinned on holding property they don’t live in and letting out to others. In the 2017/2018 tax year, the average landlord owned between 1-4 properties each.

For many landlords, it’s a family affair – they’ll own their property together with their spouse or civil partner. When that’s the case, HMRC will make certain assumptions about how you and your other half split the rental income from your buy-to-let homes and apartments.

In this article, Robert Salenius, our tax expert, takes a look at the way HMRC treats investment property transfer from married couples or couples within a civil partnership.

If my partner owns 100% of an investment property and wishes to transfer a beneficial interest in the property to me, can he transfer a 99% entitlement to the income from the property but just a 1% interest in the capital?

  • Where a property is owned jointly by spouses or civil partners who are living together, the default position is generally that the income is taxable on those persons on a 50/50 basis.
  • The default position can be overridden if a declaration is made within a certain timeframe and it is lodged with HMRC by completing Form 17 (Declaration of beneficial interests in joint property and income).
  • Form 17 can only be used if the property is owned jointly but would it work in this scenario?

No, the settlements legislation would catch such an arrangement because the exception for outright gifts between spouses or civil partners would not apply here as the income and capital shares being gifted do not match. The partner would continue to be taxed on 99% of the income.

For further advice on investment property transfer and the tax implications, please get in touch with a member of our Tax team:

T: 01904 655202 
Or email 
nigel.atkinson@hghyork.co.uk
robert.salenius@hghyork.co.uk
paul.morris@hghyork.co.uk
claire.hodsman@hghyork.co.uk