Transferring income from property held in a partnership

I receive income from property through a partnership with others and would like to make my wife, who is not in the partnership, to be the beneficiary of my share of the profits from the partnership. As she is a lower rate taxpayer this would be beneficial to us tax wise. I have been informed that I can create declarations of trust to achieve this (one for each property - 6 in total) and that they need to be registered with HMRC within 60 days of being signed. Could you please advise if this is the correct procedure.

Hi,
Yes, you are correct that a declaration of trust may be created to transfer beneficial interest in the properties to your wife within a 60 day period of the declaration being signed.
Thankyou.

Dear HMRC, I hope this message finds you well. I am seeking guidance on the tax implications of my residential property ownership and potential income-sharing scenario. I own two Buy-to-Let (BTL) properties in Scotland, both in my name. I am considering the following option: LLP Setup: I am contemplating the creation of a LLP with my wife. In this setup, the properties would remain in my name, with only the rental income being transferred to the LLP for distribution between us. Can I distribute the rental income unevenly, say 60-70% to my partner and 30-40% to me? Would a Declaration of Trust be necessary for such uneven income sharing? The HMRC manual suggests that no LBTT, CGT, or ADS would be payable upon setting up the LLP; could you please confirm this? Furthermore, if I set up a LLP, I plan to transfer the properties to a Limited Company (LTD) in three years. According to the manual, this transfer would be exempt from LBTT and ADS if the LLP exists for more than three years. Can you confirm the exemption from LBTT and ADS when transferring to a LTD after three years? Will there be any other taxes applicable to such a transfer? I appreciate your insights on this scenario and if these arrangements fall under settlements legislation. Your prompt response will be highly valued. Thank you for your time.

Hi, Further to my original post and response from HMRC Admin 8, for this (2023-34) tax year, do I just apportion the 'Partnership income' box 19 (copies into self assessment box 36) from the partnership tax return into mine and my wife's self assessments according to the split within the declaration of trust, and in line with any part tax year in which the declaration was made? And would that be the same for 'finance costs on UK residential property' box 26 (copies into self assessment box 41.1). If this is correct, then am I correct in thinking that if I transfer the whole of my interests to my wife via the declaration of trust then I won't need to put any 'income from partnership' details on my own self assessment for any tax year where she receives the whole of the benefit. Regards, Stuart

Hi Mr Ottaviano,
Thank you for your question. Your enquiry has details beyond the remit of this forum involving LLP so I am not in a psition to advise. I would strongly recommend you contact HMRC to speak to a tax inspector or prepare your enquiry by letter as it will require some time and research to respond to. 
Thank you.

Hi, I've posted this again as not sure it would get picked up with the two separate contributors to this post! Further to my original post and response from HMRC Admin 8, for this (2023-34) tax year, do I just apportion the 'Partnership income' box 19 (copies into self assessment box 36) from the partnership tax return into mine and my wife's self assessments according to the split within the declaration of trust, and in line with any part tax year in which the declaration was made? And would that be the same for 'finance costs on UK residential property' box 26 (copies into self assessment box 41.1). If this is correct, then am I correct in thinking that if I transfer the whole of my interests to my wife via the declaration of trust then I won't need to put any 'income from partnership' details on my own self assessment for any tax year where she receives the whole of the benefit. Regards, Stuart

Hi,
Yes you apportion the income in relation to the start date shown on the declaration of trust.
You  will  not need to put any partnership  income on your tax return if you received no income after that split in the relevant tax year.
However residential finance costs can be different. The interest costs are only allowable on the person who owns the mortgage.
This means that for your wife to claim any interest, the mortgage would need to be joint or in her name.
We have attached some general guidance:
Savings and Investment Manual
Factsheet: beneficial ownership
Partnership Tax Return Guide
Thankyou.

Thank you for Clarifying how to declare the Income and Residential costs with a declaration of trust in place. On that basis, if my wife was the 100% beneficiary for a whole tax year, I would need to put the whole of the income as shown on the partnership tax return (no deduction of finance costs) and nothing else. Meaning she would pay income tax on the whole of that amount. And if that is the case, is it allowable for myself to still put the finance costs on my tax return for that year (but no income) and receive a basic rate tax credit for them (20% currently)? Regards, Stuart

Hi,
If the mortgage is in your name then only you can claim the finance costs, but if you are not declaring any taxable profits you will not receive any additional relief.  
For more information:
Tax relief for residential landlords: how it's worked out
Thankyou.