Declaration of Trust for property income

Hi, From my understanding I can sign a "declaration of trust' to share my rental income (property under my own name) with my family member (assuming 50-50), and we report our share of income respectively on our tax return. If the mortgage on this property is solely under my name, would the mortgage interest be "shared" 50-50 as well as interest credit, or will this be solely reported in my tax return? Thank you.

Hi ,
 

Thank you for your question. You are correct in that a "Declaration of Trust" must be drawn up and signed, to share the rental income 50-50 with a family member. Regarding the splitting of the loan interest relief. The loan must be for the sole purpose of purchasing the property or maintenance of the property. If the criteria have been met, the loan can be apportioned equally. Thank you .

Hi, Thanks for getting back. If the "declaration of trust' transfers 100% of my rental income to the family member, then he can claim 100% of the loan interest relief as well (loan solely under my name and for the sole purpose of purchasing the property)? Thanks

Hi Annie Qu,
The previous response regarding apportionment of mortgage interest is incorrect.our apologies.
The income form property can be split via the Deed of Trust but the expenses soley incurred by you cannot be shared/transferred. 
Thank you. 

Hi, Can the mortgage interest also be included in the deed of trust / deed of assignment to be transferred as well? Also, does a 'deed of assignment', instead of a Deed of Trust, work as well, for the transfer of rental income? Thanks

Hi,
Assuming that the property has  been transferred a 50% beneficial interest in the property, then we would expect the income and expenses to be split between them, in the same proportion that the property is beneficially owned.
Thank you.

Hi HMRC Admin 8, Thanks for the reply. I understand that income and expenses can be split proportionally, but mortgage interest is no longer tax deductible expense, but given as a tax credit. HMRC Admin 25 said it can not be shared/transferred, but it seems you are saying mortgage interest, even if only under one person's name, can be shared/transferred based on a deed of trust/assignment. This seems controversial? Can you confirm which one shall I follow? Thank you.

Hi,
 

Thank you for your question. With regard to the loan/mortgage interest. I would refer you to the guidance at: Tax relief for residential landlords: how it's worked out - GOV.UK (www.gov.uk)  . Thank you .

Hi, I read the guidance but it did not say specifically about whether it it transferable to a partner/beneficiary under a deed of assignment, I can not find any guidance on this....can you point me to where I can find such guidance, or let me know if mortgage interest is transferable? Thank you.

Hi,
Information concerning the splitting of jointly held property can be found at:
PIM1030 - Introduction: jointly owned property & partnerships
Basically, if the husband owns 100% of the property, the only way for the income to be split 50/50 between husband and wife is when 50% of the property is transferred to the wife under a Deed and becomes a beneficial owner.
Furthermore, please for properties owned by married couples, follow the guidance at: 
TSEM9800 - Property held jointly by married couples or civil partners: contents
With regards to tax relief for residential landlords in respect finance costs:
Tax relief for residential landlords: how it's worked out
Thank you.
 

Hi, Can I assign my rental income to a minor child (below 18) through a deed of assignment? Thank you.

Hi,

Rental income can be assigned to a child. You can find guidance on legal and beneficial ownership and separation here:

TSEM9150 - Ownership and income tax: legal background: ownership: legal and beneficial ownership - separation

You can find how to make a declaration here:

TSEM9520 - Ownership and income tax: express trusts - written declaration

Any rental income received by your child is treated as theirs for Income Tax purposes. 

Thank you.