Declaration of Trust/Deed of Trust/Deed of Assignment – which one for rental income?

Hello, I just wanted to get some clarification regarding the above. I am a sole owner of a rental property and my wife will be receiving 100% of the rental income. I wanted to know what written agreement we need to have in place for HMRC. I want to continue to own the property in my sole name, it is just for my wife to receive the rental income fully and for her to complete her self-assessment each financial year. Also, in the agreement what things will HMRC want to see written? Thank you

Hi,

The declaration of trust will satisfy HMRC to show how you wish the allocate your rental profits to your partner.  You will need to also complete a Form 17 indicating the unequal share of this rental income to your partner. You can see guidance here:

Declare beneficial interests in joint property and income

Thank you

Hi, Form 17 only applies to those who jointly own properties with their spouses or civil partners. In my case, I solely own the property in my name so this does not apply to me. I just wanted to double-check. In our situation, will a Declaration of Trust be valid where I wish to allocate the full 100% rental income to my wife? Please note, that my wife and I are civilly married in the UK. Lastly, what specific information and details must be included in the Declaration of Trust and can this document be written by us or does it need to be written by a legal professional such as solicitor? Thank you

Hi,

You kindly explained that you are the 100% owner of the property/asset. In general law there are two types of ownership, legal and beneficial. The same person may be both legal owner and beneficial owner of the property, but there can be a separation of the two.

For land and buildings, the legal owner is the person/s in whose name/s the property is held or registered in the Land Registry (in England and Wales). The beneficial owner is the person for whose benefit the property is held. It is distinguished from the person in whose name the property is held (the legal owner). The beneficial owner is sometimes referred to as having a ‘beneficial interest’ in the property. The starting point is that the legal owner is presumed to be the beneficial owner unless there is evidence to the contrary The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership.

As we read your question, we cannot recommend a form 17 as this is in regard to creating unequal shares in a property that is owned jointly (presumed to be 50/50). There is no co-ownership so consequently a deed of trust will not be suitable. A change of ownership therefore requires Land Registry amendment.

Thank you.

I have read the above question and answer regarding the allocation of beneficial interest in a property and it has prompted me to ask my position as I it differs from what I was proposing to do. I am the sole owner of a property which is leasehold and I let it out currently to an elderly disabled person. I declare all the net income on my self assessment form and the Tax is collected by PAYEE. Next financial year I want to transfer 100% of the net income to my wife who would then declare that income on her own self assessment form and have PAYEE collect the Tax. As I am the sole owner I had read that I needed to prepare a Deed of Assignment as the whole of the beneficial interest is involved. Am I correct in assuming this and does that have to be drawn up by a solicitor or can I do it myself. I have also read that I don't need to send that to yourselves but need to hold onto it in case you want to see it in the future. Again are my assumptions correct please. If necessary I would be prepared to speak to someone if you feel that necessary and if that is the case I would appreciate the necessary contact details. Thanks in advance for your help

Hi,
The Deed of Assignment does not have to be drawn up by a Solicitor but we strongly recommend that you go through a Solicitor.  
We do not need to see the Deed of Assignment unless it is used to as evidence to back up a Form 17.  
The Deed of Assignment has to be sent in with the Form 17 or we cannot accept the Form 17.
Thank you.

Hello. I am the owner of a property with 100% share. I want to transfer a portion of the rental income to my wife without transferring any ownership. If the rental income is £12,000 per year and I want to transfer £4,000 to my wife, How the income should be reflected in our self assessment? What additional documents should we submit to HMRC ? Is form 17 valid in my case ?

Sorry about this but I included the question on feedback and only discovered that I should submit it this way when I had submitted it. The question and answers to this question is The answers to the question about deed of assignment and form 17 are a cause of concern. I would appreciate someone from HMRC giving some clearer statement of what is required in the example on your web site as I have the same circumstances. The reference to include a Form 17 is contrary to the advice in the circumstances as I see it and also as you can see in the forum answers because of the sole ownership. I am the sole owner of a property and wish to remain so but instead of the whole of the proceeds of rent coming to myself I want them to go to my wife. Without this clarification it would leave me to have to go to a solicitor and a reliable solicitor requires a sum of approximately £300 for what appears to be a simple task which could be performed by a lay person. Does HMRC agree?

Hi David,
Thank you for your question.
You can transfer beneficial ownership to your wife and she will become liable for any tax that may be due.  
This can be done via a Declaration of Trust.
For more information, please refer to our online Trusts, Settlements and Estates manual at:
 TSEM9150 - Ownership and income tax: legal background: ownership: legal and beneficial ownership - separation.
There is also more information regarding ownership and income tax at:
TSEM9170 - Ownership and income tax: legal background: ownership income follows property - variation.
A Form 17 declaration is not required as this relates to jointly owned properties, not sole ownership.
Thank you.

Hi Syed,
Thank you for your question.  
You can transfer beneficial ownership to your wife and she will become liable for any tax that may be due.
This can be done via a Declaration of Trust.
For more information, please refer to our online Trusts, Settlements and Estates manual at:
TSEM9150 - Ownership and income tax: legal background: ownership: legal and beneficial ownership - separation 
There is also more information regarding ownership and income tax at:
​​​​​​​ TSEM9170 - Ownership and income tax: legal background: ownership income follows property - variation.
A Form 17 declaration is not required as this relates to jointly owned properties, not sole ownership.  
When completing your tax returns they should reflect the Declaration of Trust.
You would both declare the amount of income you received. Any expenses would also be calculated the same way. 
Thank you.

Hi, Thanks for the previous reply. I have another property which is jointly owned by me and my wife (50-50 % share). I need information to make the following changes in my property business: 1. Total property rental income is £15,000 per year of which I receive £7,500 as I hold 50% share. I want to receive less income (e.g. £5,000) and give my wife the remaining £10,000 from upcoming months. Can I still do it being 50% owner of the property. Does it need any change in ownership? 2. If yes, should the £10,000 income be reflected in my wife's self assessment? I am not sure if we should submit FORM 17 with a declaration of trust as form 17 ensures beneficial ownership is equal to legal ownership (% of share). 3. Can I submit only declaration of trust to satisfy HMRC? If yes, how can I submit it without form 17? Is there any specific format given by HMRC on which the trust should be made ?

Hi HMRC admin 21, You said that we should complete our tax return according to the income mentioned in 'Declaration of Trust'. In what case, HMRC might need to see the trust made by us ? Can we submit the trust to HMRC without form 17 ? What is the legal process to satisfy HMRC in case of sole ownership of property with multiple beneficiaries ?

Hi,
1)    No change of ownership is required.
2)    Your wifes’ share of the income whatever it is should be declared on her tax return.
3)    No a Form 17 would not be valid in these instances but deed of trust is.  The guidance is here:
       TSEM9160 
4)    Yes you can submit a declaration of trust to HMRC.  You would send this thorough the post with a covering letter explaining the situation.  Please          make sure that both you and your wifes’ national insurance numbers are on the letter and that you have both signed the letter.  You are advised to            make a declaration of trust through a Solicitor.
5)    A declaration of trust is a legally binding document that creates a trust.  However most types of trusts giving an interest in property to somebody           who is not the legal owner now need to be registered with HMRC via the Trust Registration Service.  You can find guidance on the registration               requirements and how to register here:
       Register a trust as a trustee.  
       There’s also more information about what type of trusts need to be registered at:
       TRSM23050
       Thank you.
 

Hello, I have another URGENT query: 1. How much we have to pay to HMRC for registering a declaration of trust ? 2. After registering the trust, will HMRC notify me that the registration is successful or will they provide any relevant notification ? 3. As you said no ownership change is required (to change income portion between us), but I want to show more rental income in my wife's tax return. Should I prepare a declaration of trust in this case?

Hi Syed Tanjill Ahmed,
 You would not be chrged by HMRC for registering a declaration of trust.
Guidance on the registration requirements and how to register here:
Register a trust as a trustee
There’s also more information about what type of trusts need to be registered here:
TRSM23050 - Types of trust that need to be registered: contents: excluded express trusts: contents: property ownership
You can declare your share of the benficial interest on your return.
Thank you. 

Hello, I have a clarification to make in respect of creating a Declaration of Trust. I am the sole legal owner of a property and plan to rent the property in the future. I am married and plan to make a Declaration of Trust assigning 100 % beneficial interest to my wife. I understand my wife can then receive the rental income and complete this 100% rental income on her self assessment and even though I will still remain the legal owner of the property. Thank you.

Hi ,
 

Thank you for your question.  Yes you can make a declaration of trust to your wife and she would declare this income on her self assessment tax return.

Thank you .