Rental income allowable claim on self assessment

Hi All, I have a flat which I want to rent out and let rental income go to wife 100%, even if that property is on my name. There must be a form I can fill to do that in scotland. 2. What all expenses can my wife claim in her self assessment annually. We are going to a property management firm to fully manage the renting of the flat. So can we claim any expenses we have from management firm against rental income, mortgage paid on the property, gas inspection annually, PAT test, new smoke alarm etc. Please do advise what forms and when this should be done annually or is it better to go to a CA for advise? By the way me and my wife are employed in different firms. So never had to do any self assessment till now. Thanks in advance

Hi S0787571,
Thank you for your questions.
o agree an unequal share of beneficial income from property you need to complete a Form 17. (see .GOV .Uk).
Declare beneficial interests in joint property and income
Expenses arising in the income from property business must be wholly and exclusively incurred.
Again more guidance is available online via the .gov website (property income toolkit).
Property rental toolkit
If you both receive an income from property in excess of £2500 that would meet the criteria for a tax return.
If you are not a receipient of Income from property then no return is required for you. 
Thank you. 

Thanks for response. But since the current property is solely on my name and if I want the rental income given to my form, I assumed I need to do a deed of transfer and then fill form 17. But when comes to tax return, if I am.one paying for the mortgage on this property and all other expenses. Can I wife in her self assessment claim these expenses against rental income even if she didn't pay for them?

Hi,
 

Thank you for your question. If you transfer a property in sole name to your wife then a form 17 would not be appropriate. However you should send in a declaration of trust showing the clear split of ownership signed by both parties and witnessed by a third party. Your wife cannot claim interest costs on the mortgage. Claiming expenses for interest on the mortgage can only made by tthe person who takes out the loan and pays the interest on the loan. Please see : Savings and Investment Manual  . Thank you.

I was thinking of a deed of transfer, which could be easier done to move the percentage to my wife. But in that case, even if I am paying all the charges for the property, like maintainence bills or any other charges incurred. Can my wife still claim that in a tax return end of year?

Hi S0787571

Thank you for your question.
Further information may be necessary to fully answer your query, however, based on my interpretation of your question that the property is owned by both yourself and your wife, then following TSEM9812 outlines that by transferring beneficial interest to your wife, she may claim for the maintenance bills or other charges incurred, as long as they are wholly and exclusively for the property business. 

Thank You

Hi, not HMRC but I am qualified in accounting and im also scotland (so familiar with some of our differences to england). Just to check, you said the property is in Scotland? Scots law doesn't normally recognise the concept (or separation) of beneficial ownership from legal ownership. It is technically a property law question rather than a tax law one. I'd also mention if it was in England, you would need to transfer beneficial ownership of the property itself. If you only transfer the right to income it is caught by settlements (which means it would remain taxable on you). Sorry to be the bearer of bad news but I was thinking it was better to be the unwelcome messenger now rather than risk you proceeding based on a misunderstanding in a way that is detrimental.

Hi, the property is solely on my name and as I am on higher pay bracket than my wife. I want to move 100% rental income to my wife via a Deed of assignment. My assumption: 1) Deed of assignment doesn't need my wife to be on the mortgage and doesn't need her to pay any bills for the rental property. 2) yet She can do self assessment end of year claiming all the expenses, including mortgage interest on the property. Are the above correct.

Sorry to interrupt but under Scots law you can't generally separate beneficial and legal interests. In order to transfer rental income to your wife, you would need to change the legal title.

Hi,
 

S0787571 ,   Thank you for your question. I would advise you that in order to separate the income from the property a valid declaration or deed of trust is required. Please see the guidance at TSEM9170 - Ownership and income tax: legal background: ownership income follows property - variation - HMRC internal manual - GOV.UK (www.gov.uk). Your wife will only be able to claim expenses if she has incurred them. If the mortgage is in your name only then your wife will not be able to claim any loan interest relief as she has not be considered to have incurred it.  Thank you.

Even I'd all expenses including mortgage comes from a joint account?

Hi @Bella Boo, So in Scotland, if I can't do a deed of transfer to transfer income to wife. That was easy way to move income 100% to wife. Else I have to do deed transfer to wife and also redo the mortgage. Won't adding my wife to title and mortgage and doing From 17 to split 100% allow my wife do self assessment for all expenditure including mortage? Under Scottish property law.

Hi, Sorry I didn't realise you had 2 threads running (I did get a sense of deja vu, like I'd answered this before! Haha). In Scotland you can't separate the income (benefit) from the title (legal) of heritable property. I replied on your other thread explaining form17 can't be used in Scotland because the legal and beneficial cant be separated. I can't unfortunately post any links to help explain or confirm as HMRC only allow official links (like from government departments) and hmrcs manuals do specify these are the rules for England and Wales but don't go on to specify the rules for Scotland. You could try searching for separate beneficial and legal interest scotland or some variation of that and look for any legal or accounting pages. Maybe also read about how trusts in Scotland vary from trusts in England and that we (scotland) don't recognise bare trusts. The only sort of official link I can provide is with regards to IHT and all it says is in Scotland an estate only includes property held legally, but doesn't explain why (the why is if you hold the legal interest in scotland, you hold the beneficial). Tbh you'd need to speak to a solicitor and possibly an accountant to get something tailored for your circumstances that works for tax purposes and is within scots law. If you do put your wife on the mortgage then that may result in LBTT (our version of SDLT) being due though. But imo if your wife owned 100% and was at least on the mortgage jointly, that would give her 100% income and also allow her to claim the tax reduction for mortgage interest.

I will add my wife to the title deeds thru a solicitir, and change existing mortgage to include her on it. Then after the mortgage fixed period ends in 2ys I can change the title to remove me and move the title deed to her. That way it should be sorted then. It's just trying to gauge the cost against tax benefit. By doing the above. Solely due to fact that wife is on basic tax bracket, this all made sense to do. Else as a landlord ther isn't much savings now a days.