If so, it is worth considering the income tax implications of this if you have not done so already.
Neves Solicitors routinely prepare Declarations of Trust for joint owners of property who are in receipt of a rental income, but who split this income in different proportions between themselves.
HMRC will automatically treat any rental income as though it is split between the joint owners equally. This would result in each party paying tax on half of the income. However, where this doesn’t truly reflect the position for the parties, a Declaration of Trust can be prepared and signed by both parties, recording how they each own the equity in the property, and therefore any income from the property.
Joint owners decide all sorts of percentage splits amongst themselves, from 99/1 to 51/49. It is the decision of the couple themselves, and HMRC has the following requirements when looking at whether or not to treat rental income equally. The first is that the parties actually own the property in unequal shares. If the parties do not but wish to do so, then this can be facilitated by Neves as part of the Declaration of Trust process. The second is that the parties are actually entitled to the income arising in those unequal shares, and the third is that the parties want to be taxed on that basis.
It is also not uncommon for the circumstances of couples to change. If this does happen, their situation can simply be reviewed and the ownership of the equity, and therefore the rental income split, can be changed accordingly.
HMRC need to be informed of an unequal equity and rental split, otherwise their automatic position will apply. If a Declaration of Trust is done, HMRC needs to be notified and certain documents lodged with HMRC. Again, this is something that Neves can assist with as part of the process of making a Declaration of Trust. If HMRC is not notified, they will continue to treat the income received as being split equally.
It is also worth noting that advice should be sought by people who own property jointly but are considering changes because there could be capital gains tax implications of changes of ownership.
If you own joint property in unequal shares and receive the income from it in unequal shares but require a Declaration of Trust in order to formalise this arrangement with HMRC, or if you wish to own your property and receive your rental income in unequal shares but are unsure how to proceed, contact Neves Solicitors for specialist advice. Call 0330 0945 500, email firstname.lastname@example.org or visit www.nevesllp.co.uk