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If a property is jointly owned by a married couple, by default the rental income is divided on a 50:50 basis. Unless, that is, the property is owned in proportions other than 50:50 and a joint declaration to that effect is made using a form 17. You cannot simply allocate the income to the part owner who pays a lower rate of tax. Where the money is banked and who it is spent by is irrelevant.
I hope this helps but let me know if you have any further questions.
They would normally only go back six years. HMRC does have access to Land Registry records.
It's not as if the income hasn't been disclosed at all which is something many taxpayers have been guilty of. If HMRC charge a penalty, I'd appeal against it if it is more than 30% of the tax owed. Clearly, your wife will be due some tax back.