Husband & Wife rental income

JJH1969

A husband and wife own a property 50/50 but want to be taxed on it 10/90 to reflect the work the wife has done managing the property and drawing up agreements (she is a solicitor). I know they have to be taxed 50/50 but could she set up as a sole trader and then the invoice be deducted as a business expense?

T.C.

No, HMRC will insist on 50/50 if the property is owned jointly. The only way around this is get the partner to gift the property to the other and then the latter can be taxed on 100% of the profit.

JJH1969

Thank you - does that have to be done through a solicitor?

T.C.

Yes, a solicitor can do a transfer of the ownership.

Natsmomma

I agree, not possible as the ownership percentages detained the rental split.

It is not possible to invoice your own business for work done, so self employment is not a solution either. Of course, husband could give up 4/5 of his rental income to his wife, but this doesn't help the tax position.

deanshepherd

Couple of options:

As TC says a proportion of ownership can be gifted (does not have to be 100%). No CGT as inter-spousal. Will need to be formally drawn up either as a trust deed or a conveyance plus HMRC have to be notified in advance of the tax year in which you are changing the split so not immediately effective. May have a stamp duty issue to consider, may affect the mortgage..

If the tax is worth it then W could set up an LTD to manage the property and invoice them for her fees.

JJH1969

Sorry about this but they aren't actually married - just partners!

T.C.

Then I don't think any of this is possible. It may have to be 50:50. Worth checking with a solicitor though.