Jointly owned rental property when unmarried Self Assessment Questions

My partner and I have some properties that we rent out. The properties are mortgaged and owned jointly in equal shares. We live together and are neither married nor in a civil partnership. We are not set up as a company. We know we have to submit individual Self Assessment tax returns for the rental income we receive. One of us is employed full-time and is a higher rate tax payer while the other is a basic rate tax payer and currently receives no other income but looks after the properties and deals with everything regarding the rentals. It is my understanding from reading this forum and also from reading "PIM1030 - Introduction: jointly owned property & partnerships" that when we submit our tax returns, we can declare an unequal split between us of the rental income & expenditure. For example, one of us can declare that their share of the income and expenditure is say 90% whilst the other only declares 10%. Is this correct? If so can we change this division of shares each year if we agree this between ourselves? Can the shares be any division? E.g. 100%:0%? Also, it is my understanding that because we are not married we do not need to complete any official forms regarding this but simply declare the split that we have agreed in the figures submitted in our individual Self Assessment tax returns each year. Please can you clarify whether my understanding of all of this is correct? Thanks in advance.

Hi confusedll,
 Based on the information provided, joint owners may decide a division of profits year on year with the same percentage declared for any expenses.
We  would refer you to the following guidances:
TSEM9200 and TSEM9160 as starting points which outline how you may decide on the split of income and expenses:
TSEM9200 - Ownership and income tax: legal background: joint ownership - contents
TSEM9160 - Ownership and income tax: legal background: ownership - income follows property
Thank you. 

 

Thank you for your response. I am still a little unsure after reading the guidances you gave. We are in a personal relationship and we own the properties as joint tenants but we are not married or in a civil partnership. Are we able to divide the rental income & expenditure from these properties into unequal shares as suggested when submitting our tax returns or do we have to split it 50/50 each year given that we own them as joint tenants? If we can divide it unequally, do we need to submit a form to officially declare this to the HMRC? If so, which form? Thanks again

Hi ,
 

Yes you can divide the property income into unequal shares. For example 0% to one partner and 100% the other or 25% to one partner and 75% to the other.  You need to send in a declaration of trust splitting the beneficial ownership how you wish but remember as has already been pointed out in the answer to your previous question you would need to declare the same percentage for any expenses.  Whilst the beneficial ownership of the property income would change the legal ownership of the actual property would remain the same.  Guidance on declaration of trusts can be found here: Trusts, Settlements and Estates Manual    . For further help on Trust Queries please phone 0300 123 1072 between 9 am & 5 pm Monday to Friday or write to HM Revenue & Customs              Trusts BX9 1EL. Thank you .

Hi, Thanks for your response. It is much appreciated. After doing some research into Declarations of Trust, it would appear that there are some legal ramifications of doing this whereby it may affect our joint tenancy, invoke SDLT, change CGT, and cause further issues down the line for us. It would seem not to be worth the risk to us when just declaring a small extra income from our rental properties. Although we own the properties as joint tenants, we have agreed that the majority of profit made is passed to just one partner as they are the one that deals with everything regarding the rentals. The other partner plays no part at all on in the day to day running and administration of the rental properties. Would an uneven split be acceptable to the HMRC for these reasons or not? One of the reasons that I believe we could do this without any official declarations is with reference to advice given by two of your colleagues (HMRC Admins 2 & 19) on this forum just 4 months ago whereby someone in similar circumstances to us was advised:- “As an unmarried couple, or if the property is held jointly with a friend or sibling, you can agree on different split of profit and loss. Each must declare their own share of rental income to us. No deed of trust is required and you do not need to notify HMRC of the split.” And “As advised, unmarried partners who own a property can agree to a different split of any profit, and, or loss. Married couples are treated differently as it is automatically set at 50/50 unless they declare, using a Form 17 declaration, that the income is an unequal split. You and you partner are not married. Therefore, no formal agreement is required, and you can declare no profit whilst your partner declares 100%.” Was this advice incorrect? Please can you clarify whether we can split the income unequally without any official deed/declaration/agreement given that we are not married? Or do we have to declare the profit 50/50 for tax purposes regardless how we have agreed to split the profits in real life, unless we have an official Declaration of Trust submitted to the HMRC? Thanks in advance.

Hi HMRC can confirm that the advice already given by colleagues (HMRC Admins 2 & 19) is correct. In your circumstances you can agree a different split of profit or loss as opposed to the normal 50/50 split. We can also confirm that no deed of trust would be required. Thank you