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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My wife and my main UK home, purchased in August 1999, is

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My wife and my main UK home, purchased in August 1999, is owned and registered with Land Registry in my name only, there is no mortgage. We have lived in this home as our main private residence since 1999.
We also have one BTL property each held in our sole names and these are reported to HMRC each tax year via our self-assessment tax return submissions.
We are looking to rent out our main home for part of each tax year, starting from the 2016-2017 tax year. In order to utilise both of our personal allowances, as opposed to a transfer of equity, we are looking to use a specialist firm to execute a Deed of Trust.
The property will be held upon trust beneficially for both me and my wife in equal shares. The deed would also state that any rental income derived from the property would be due to each of us in the same equal shares.
Please can you confirm that as we are married, there will be no CGT or other tax implications of putting the property into Trust.
We understand that renting the property out will have an impact on our Private Residence Relief when we come to sell the property. Please confirm this would be the same whether the property is placed in Trust or not.
Once the deed of Trust is executed, do we need to attach a copy to each of our self assessment submissions for the 2016-2017 tax year or just advise HMRC the Trust has been set-up within the 'Comments' section of our returns? Do we need to do this every tax within our self-assessment submissions? Thank you.
Submitted: 11 months ago.
Category: Tax
Expert:  taxadvisor.uk replied 11 months ago.

Thank you for your question..

According to tax rules, if you live together with your spouse or civil partner, HMRC would normally treat income from property held in your joint names as if it belonged to you in equal shares and tax each of you on half of the income, regardless of actual ownership.

You need to have a declaration of interest or deed of trust if you wish your beneficial interest in it to be dealt with it differently. As the property is held in your name only, the steps you wish to take would suffice to support splitting the income and gain equally. My personal view is that a Statutory declaration of interest would be sufficient to achieve the desire results and it is not necessary to have a deed of trust in place. Maybe you should suggest this to your specialist firm executing a Deed of Trust.

More on declaration of beneficial interests in a joint property and income is covered here (Form 17)

https://public-online.hmrc.gov.uk/lc/content/xfaforms/profiles/forms.html?contentRoot=repository:///Applications/SpecPersTax_iForms/1.0/17&template=17.xdp

Trustees pay no Capital Gains Tax when they sell a property the trust owns. It must be the main residence for someone the trust says can live there.

More on this is covered here

https://www.gov.uk/guidance/trusts-and-capital-gains-tax

The gain is covered by private residence relief. Renting the property will have an impact on your private residence relief whether the property is placed in Trust or not.

You need not attach a copy of the Trust Deed to your self assessment tax returns.

Once you start earning rental income you would report it by completing supplementary pages SA105 UK property and show your share of income and profit respectively. No need to advise of the trust every year.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Expert:  taxadvisor.uk replied 11 months ago.

Hi there

Just checking to see if there are any issues from my last posting that need further clarification or does my response answer your question.

Many thanks

Customer: replied 11 months ago.
Thank you for your response which is very helpful. I will ask the company (deedoftrust.co.uk) if they can help with a Statutory declaration of interest. I appreciate you have said we do not need to attach a copy of the Trust Deed to our self assessment returns. Do we need to put any comment on the self assessment forms in the first year to say the Deed of Trust is in place? If we use a Statutory declaration of interest what do we have to do with it in terms of advising HMRC/Land Registry? Are there any CGT or other tax implications in using a statutory declaration of interest? Thank you.
Expert:  taxadvisor.uk replied 11 months ago.

Thank you for your reply.

There is no need to attach a copy of the Trust Deed to your self assessment tax returns. You retain the original in the event there was an enquiry and The Tax office needed some proof. The same applies to Statutory declaration of trust. Once you have the property in joint names, HMRC would take the income and gain as being shared equally unless you advise them otherwise. There are no adverse CGT or other tax implications in using the statutory declaration of interest.

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 11 months ago.
Thank you of confirming. I notice that on the HMRC Capital Gains Tax link (https://www.gov.uk/guidance/trusts-and-capital-gains-tax) Capital Gains Tax may be payable when:
-assets are put into a trust
Will any CGT be payable be paid if we put our main UK home into A Deed of Trust?
Expert:  taxadvisor.uk replied 11 months ago.

If the property is in trust and it is used as main residence then there is no CGT payable.

Also if any CGT was payable the the gains allowance will be lower and you get one lot of gains allowance only.

I am suggesting you opt for statutory declaration of interest.

I hope this is helpful.

Customer: replied 11 months ago.
Thank you for confirming that there is no CGT once the property is in a trust but is there any CGT incurred on putting the property into the Trust - the HMRC link mentions there could be when assets are put into a trust? I appreciate you are suggesting a statutory declaration of trust but I am keen to understand the Deed of Trust approach too. Thank you.
Expert:  taxadvisor.uk replied 11 months ago.

Thank you for your reply..

The link here explains when CGT might be payable

https://www.gov.uk/trusts-taxes/trusts-and-capital-gains-tax

I hope this is helpful.

If you are happy and there are no more issues I will appreciate if you would kindly rate/accept the service I provided to ensure I get credited for it by Just Answer.

taxadvisor.uk and other Tax Specialists are ready to help you
Customer: replied 11 months ago.
Thank you. I will now rate your answer. I have been charged twice for your answers - once yesterday and again today, die to issues using the even though my questions are related to my initial question. I have asked Just Answer to refund one of the charges but as yet have had no response.
Expert:  taxadvisor.uk replied 11 months ago.

I thank you for accepting my answer.

Best wishes

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