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Sam
Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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We have income from a jointly owned property, but are not married.

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We have income from a jointly owned property, but are not married. My understanding is that, by not being married we do not have to assume a 50:50 income split but can choose a 99:1 or even 100% to the lowest earner. Is this true and if so is evidence required that the income is split between current accounts or if 100% to the lower earner that the income goes to their account in the first instance. Any help appreciated. Mark
Sam
Hi Mark
Thanks for your question, I am Sam and I am one of the UK tax experts here on Just Answer.
Can you advise whether you hold this property as tenants in common or joint tenancy?
And whether there is any mortgage on this property and what % of the loan is attributable to whom.
When was the property purchased and has all rental income been declared to HMRC as 50:50 so far?
Thanks
Sam
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Customer: replied 3 years ago.

Hi Sam

We are tenants in common, but I'm unsure if the mortgage has been formerly split, we certainly pay out of a joint account, all all income goes to my partners account. Ownership was transferred from sole ownership to tenants in common in late 2008, since which we've declared the income 99% to the lower tax earner. Can we split declared expenses (e.g. mortgage interest, repairs, agency fees etc) in the same ratio?

Thanks

Mark
Hi Mark
Thanks for your response and the additional information.
As tenants in common you can choose any split you like, which you seem to have taken advantage of already.
You do not need to prove that the income is physically split this way, as long as the ration on income, less expenses is ALL split to the same way. (So in answer to the questions you posed)
1)Is this true and if so is evidence required that the income is split between current accounts or if 100% to the lower earner that the income goes to their account in the first instance.
It makes no difference - as long as you had documented along with the drawing up of tenants in common that the split was 99$ to the lower earner and 1% to the high earner - and it matters not if the mortgage is not recognised as this with the bank/building society.
You also asked
2)Can we split declared expenses (e.g. mortgage interest, repairs, agency fees etc) in the same ratio?
Yes you do - as then the percentage of expenses claimed is in line with the rental income ratio split.
Thanks
Sam,
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Customer: replied 3 years ago.

Dear *****

Many thanks for the very useful information, in particular in regard to split of expenses. I thought we were filing self-assessments correctly, but wasn't sure whether proof was required where the income was being deposited, expenses being paid from.

Many thanks

Mark
Hi Mark
Thanks for your response
The only time you would be required to produce any type of evidence would be in HMRC looked into the tax return as an enquiry. But then as you have the tenants in common document in place, and have been declaring both income and expenses according to this agreement - this would all sit well with HMRC.
Let me know if you require any further clarification, If, in the meantime you would rate/accept the answer, it would be appreciated, as this ensures I am credited for my time.
Thanks
Sam
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Customer: replied 3 years ago.

Hi Sam

Thanks again. While we are tenants in common, it's not clear from the documentation whether a 99:1 income split is formerly declared. Would you know if this can be done retrospectively. It's not clear from the HMRC info on this that a legal registration of this is required.

Thanks

Mark

Hi Mark
This ideally should have been done at the time the tenants in common agreement with drawn up - so it is clear what the split is to be.
Because if its not clear then it would usually fall into what the bank/building society assume is the case - which I fear will be treated as 50:50 (as per the loan/mortgage)
You cannot elect in retrospect, however as the declaration of rental income by you both has been 99%/1% since the tenants in common was drawn up (in 2008) then HMRC are more likely to accept this.
But you should have also drawn up a declaration of trust at the same time to detail the split, I can only assume you were not offered appropriate advise on this at the time.
I would advise that this is undertaken as soon as possible, to cover any hassle from HMRC - but this cannot be agreed in retrospect but just formalised from the date of the declaration.
And should HMRC ask after the tax years prior to this position you have the fact that the declared split has remained the same since the tenants in common document was drawn up.
I would also advise this gets built into your wills too - so there is a consistency on all aspects of your affairs.
Thanks
Sam
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