Deed of Trust - Transferring Income to Spouse

Hello, I've seen this issued discussed on numerous occasions on this forum, but I'm still unclear on the rules. I'll outline my situation first: I am to sole legal owner of a flat (only my name on the title deed) which I rent out. I'm a higher rate tax payer and my wife is a basic rate taxpayer. I currently receive all the rental income which will be taxed at 40%. It has been suggested that I can set up a declaration of trust, sharing the beneficial right to the rental income with my wife on a 50:50 basis, meaning 50% of the rental income would be taxed at her basic rate which is clearly more tax efficient. It seems I can do this without changing the title deed, no form 17, not involving a solicitor or having SDLT implications. On this forum, there seems to be a lot of people doing this. However, from my reading, it would suggest that the above approach triggers settlement law, meaning regardless of the declaration of trust, I would still be taxed on the full income as I still retain an interest in the property. Is anyone able to confirm whether the approach I've outlined here triggers settlement legislation (TSEM4200)? Thanks, Callum

Hi
Thank you for your question.
A Deed of Trust is a legal document.
If you transfer a 50% share of the property to your wife by a Deed of Trust then she  becomes the legal owner of 50% of that property for all legal purposes , not just from a HMRC perspective.
For Income tax purposes , the share of the income is treated as being 50/50 .
Should the transfer percentage be other than 50% , then form 17 can be submitted to ask that the income from the property is split in the same way as the ownership of the property.
The 50/50 rule - asset first put into joint names confirms that the income from property is split 50/50 from the date it was put into joint names.

Thanks. How is a Deed of Trust different to a Declaration of Trust?

Hi CRS15,

A declaration of trust is usually a statement by the legal owner of property that holds the beneficial interest for someone else.
They are not transferring the legal title of the property as per TSEM9520 attached here:
Trusts, Settlements and Estates Manual TSEM9520 - Ownership and income tax: express trusts - written declaration.
A deed of trust is a legal document that transfers the legal title of a property to a third party.
Certain trusts may need to be registered with HMRC, further guidance on trusts can be found here:
 Register a trust as a trustee.

Thank you.

Hello, Does a Declaration of trust need to be registered on the trust registration services?

Hi Belal Ahmed,
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 Trust Registration Service Manual TRSM23050 - Types of trust that need to be registered: contents: excluded express trusts: contents: property ownership
Thank you.

 

Good Morning , please see the current circumstances and whether a deed of trust is allowed; Myself and my fiancé intend on getting married in 2027 Her house was her marital house ( divorced in 2019) she remained in the house and owns it with a small mortgage after buying out her ex husband’s share , it’s now only her name on the land registry deeds. When we marry in 2027, she will move in with me and her house will be rented out. In order to avoid her ex getting even more Child Maintenance ( currently she pays him £400 per month) the intention is to obtain a deed of trust that says: She remains the legal owner of her house 100% I’m not making any legal claim on the house and my name will never go on the deeds for it. 100% of the rental income comes to me and I pay all the relevant taxes on it. Then 12-18 months later when she ceases to have to pay child maintenance ( due to the children reaching the age she doesn’t have to pay) the deed is revoked and she assumes all the rent as her income and declares it as such. Can you let us know from a HMRC point of view what forms / documents would be needed to make this fully legal. Just want to make it clear she doesn’t object paying CM if it actually went to their children. But he refuses to buy them clothes / take for haircuts etc , but he seems to enjoy a lot of holidays ( without the children)

Hi ,
 

Thank you for your question. Although you may be married in 2027, your wife would remain the sole beneficial owner of the property and all rents less deductions would remain chargeable on her. The only way in that rents could be set against you, would be if you had a beneficial interest in the property and your name added to the property deeds. Under those circumstances, you could complete form 17 and a Deed of Trust to split the income. Please refer to the following hyper links. PIM1030 - Introduction: jointly owned property & partnerships - HMRC internal manual - GOV.UK (www.gov.uk)   TSEM9842 - Property held jointly by married couples or civil partners: Form 17 rule: introduction - HMRC internal manual - GOV.UK (www.gov.uk) . Thank you .

Thank you Would adding me to the deeds mean I have to pay stamp duty? And if it does , would it mean the enhanced rate of stamp duty as I already own property?

Hi ,

Thank you for your question.  If you have an enquiry regarding payment of Stamp Duty, please ring the helpline on 0300 200 3510 . Thank you .

Hi I own a share in a property which when held in my name would trigger a CGT liability on sale. If I share ownership with my wife in order that we may both use our own CGT allowance. This would be a via a Deed of Trust or Declaration of Trust would this need to registered with HMRC.? Would either a Deed of Trust or Declaration of Trust sufficent ? Thanks K

Hi, Me and my wife share a buy-to-let property (50:50) and currently both of us are declaring the rental income , but I would like to transfer the 100% of the income to my wife's name. How should I do that? Can I do this with back dated? I have been paying unnecessarily as I am higher earner and my wife is under the minimum income.

Hi ,
 

Thank you  for your question . Please see relevant guidance at : Trusts, Settlements and Estates Manual  .

Thank you .

Hi ,
 

Thank you for your question.  If you jointly own a property you can declare unequal beneficial interests by way of a Form 17 declaration.  You will also need to provide a deed/declaration of trust.  For more information, please refer to our Trusts, Settlements and Estates Manual at : Trusts, Settlements and Estates Manual  . Thank you .

Hello. My parents gave my brother in a deed of trust their house in 2005. Father passed away in 2009, and mother passed away August 2022, so we are trying to figure out what supposed to happen now. We are aware of the 7 year rule, and gift of reservation. Our mother stayed living in the house, but I did read somewhere that the gift of reservation doesn't apply in the case of the parent (our mother) having to be looked after and cared for by my brother who lived with her in the house, because our mother was elderly and infirm. My brother had registered her as disabled when she was aged 82 to get a blue badge for the car in 2015, and had to had carers come in to wash her. My brother had to look after her for well over 10 years. What happens in a case like this? Also, with regards to inheritance tax, the house is worth at the very most £400k, so no inheritance tax has to be paid, because the house was given direct to a son by my parents, in this case £500k being the tax threshold. I did read somewhere, because it's a gift of deed, no probate is needed, because a document of ownership already exists. I've been going around in circles trying to read up on what needs to be done. Please point me in the right direction. We are feeling very lost. Thanks very much.

Hi,
Please contact the Inheritance Tax team for advice.
Inheritance Tax: general enquiries
Thank you.

Hello, I did phone the help line before posting the question here. The person told me to read up on the subject, I told her I did already but couldn't find answers to my question. She told me to seek legal advice. I'm just trying to find out what we do next. Thanks.

Hi,
Unfortunately we are unable to answer Inheritance Tax questions on this forum.
Thank you.

Hi My husband owns two BTL properties 100%. Both have mortgages. 1. We want to use a Deed of Assignment to transfer 100% rental income in one to me. As I run it it and pay maintenance bills , and repairs from income, can I check I can deduct those allowable expense from my income from that property (once we have a Deed of Assignment in place) 2. As his name is on the mortgage can he claim mortgage interest relief for the two rental properties against the income of the one from which he would still receive 100% rental income?

Hi Editrix,
Thank you for your question.
A Deed of Assignment is not applicable.
To split the rental income in unequal share, both parties must have a beneficial interest in the ownership of the property. This must be done by redigesting both parties on the property Deeds and to submit a Deed of Trust signed and witnessed accordingly to HMRC.
As regards the expenses question.
The expenses incurred in maintenance of the property will share equally in accordance with the split of unequal shares. Therefore, if the property income is split 10/90, the expenses with be treated the same way. Furthermore, if the property is held under joint ownership of husband and wife, Form 17 must be completed.
Further information can be found on our website: PIM1030 - Introduction: jointly owned property & partnerships and
TSEM9842 - Property held jointly by married couples or civil partners: Form 17 rule: introduction.
As regards the residential finance (mortgage) cost. They must be set against each property that they cover; you cannot set the two properties residential cost (mortgage) against only one property. Therefore, if you are in receipt of income from one property, the residential cost must be included in your accounts for that property.
Thank you.