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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4199
Experience:  FCCA FCMA CGMA ACIS
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Tax Planning.

Customer Question

Tax Planning.

Mr A owns a property which he lives in (Property A).

He wants buy a new property to move into (say property B). This will become the new place of residence.

Property A will be let out.

Property A is mortgaged under Mr A's name and he is therefore the registered owner. But in reality Mr A & Mrs A are joint owners only not on paper because Mrs has poor credit rating which limits access to mortgages.

Mr A is a higher rate tax payer whilst Mrs A is a lower rate tax payer.

What arrangement can Mr A make to utilise Mrs A's lower rate tax band on the rental income of property A?

Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Make Mrs A wholly and exclusively responsible for the management and letting of the property. Then it is possible for 100% of the net rentals to be apportioned to her tax account. Otherwise, of course, the net rentals would be split 50/50 between Mr and Mrs A. I do hope I have shown you a way forward in this matter.
Expert:  Sam replied 2 years ago.
HI I have a different response I am afraid the suggestion offered would not be accepted by HMRC - the only way to utilise Mrs As lower rate band position is to transfer the property entirely in Mrs A's name. Because if the property is in joint names HMRC would treat the income as 50;50 and Mrs A could NOT be paid for the management of the property as she is co owner - so cannot be paid for the management of the property and a rental receiverThanks Sam
Expert:  bigduckontax replied 2 years ago.
I hold to my original opinion.
Customer: replied 2 years ago.

Hi

Thanks.

Do you know of people whom have got approval from HMRC on the arrangement you are suggesting?

Expert:  bigduckontax replied 2 years ago.
Over the past few months many experts on this site have replicated the advice which I have given you enabling the full impact of the rental to fall on the spouse. HMRC will tend to the purist view that the rentals should be split 50/50. Please be so kind as to rate me before you leave the Just Answer site.
Expert:  Sam replied 2 years ago.
Hi
HMRC would challenge any claim made in this way and at the end of the day its their legal attitude that matters!
I worked for HMRC for 26 years so know first hand what is and what is not permissible - and what my colleague suggests sadly is wrong -
And a letter to HMRC requesting (or phone call) will verify this - but if you ring then make sure you are prepared to wait for a technical staff member to call you back within a few days and that you ask for their decision in writing
And only rate of you are satisfied with the level of expert advsioe provided.
Thanks
Sam
Expert:  bigduckontax replied 2 years ago.
Unfortunately this advice does not correspond with that given by most other experts on this site. HMRC tend to operate from their own manuals which express tax law as HMRC would like it to be rather than the reality of the legislation which probably explains why they now loose the majority of cases they bring to court.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4199
Experience: FCCA FCMA CGMA ACIS
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.