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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Here is my situation... I currently earn £57500 of which I

Resolved Question:

Hi,
Here is my situation...
I currently earn £57500 of which I sacrifice £12500 to my pension.
I own a flat generating approx £2000pa profit (before the new interest rules kick in). Mortgage interest is currently £225pcm.
I married last September
We have two kids, 5 and 10.
She earns around £4000pa
We jointly own a holiday home in the US which will not make a profit for a few years but we do plan to inform HMRC to accrue the losses to offset against future tax.
I am looking at making her 100% beneficial owner of the flat for TY15\16 onwards in advance of filing our returns.
Is this possible? what are the pitfall? (I understand the risk is we split)
Submitted: 7 months ago.
Category: Tax
Expert:  TonyTax replied 7 months ago.

Hi.

If your wife is the sole owner of the property, all the rental income will be assessed on her. She clearly has a significant amount of unused personal allowance so the tax liability would be lower. Losses on overseas properties cannot be relieved against profits on UK properties as you will read here.

The problem you have is that the mortgage company will have a problem because your wife has a low income. You may have you act as guarantor. In addition, there may be a stamp duty charge on the mortgage transfer as you will read here.

I hope this helps but let me know if you have any further questions.

Customer: replied 7 months ago.
I am aware that overseas losses are treated as a separate thing. It will make its own profit in a few year.We do not want to change the mortgage for the UK rental property however my understanding is that the legal owner (i.e me)and beneficial owner do not need to be one and the same.
Expert:  TonyTax replied 7 months ago.

You could execute a deed of trust to try to separate the income and capital rights but HMRC don't like it and I know some lenders don't. Take a look here for information on deeds of trust and consider consulting a solicitor as its more of a legal question than a tax one. In particular, read the notes under the heading "Form 17 rule" here.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15763
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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