Declaration of Trust

[Marigold]

Hi everyone, newbie here

I wonder if anyone has any experience with a Declaration of Trust reversal?  We have one in place 99% wife & 1% husband and are planning on selling our rental property in the new year as that's when our current mortgage deal ends so then no ERC would apply but mortgage will increase by nearly £150.   

Do we reverse this before we give the tenants 2 months' notice or just before we put the property up for sale?

 

 

 

 

[Richlist]

I don't see why it's necessary to reverse the 99:1 arrangement at all.

Why can't the 99:1 split remain in place until the property is sold ? Once the property is sold the arrangement expires as there is no property to apply the arrangement to.

 

[Marigold]

The arrangement was initially set up as 99% has no income and 1% higher rate tax payer.  I am not clear on how this would affect Capital Gains Tax with this ratio if left as is.  We did live in the property for 10 years and have let it for the last 6 years but now want to sell as soon as the current mortgage deal ends.  

[Richlist]

I'd suggest you get professional advice from a solicitor specialising in property matters or from an accountant.

In the meantime here's my two pennies worth....

1. There is a difference between legal ownership and beneficial ownership. Your 99:1 arrangement ONLY affects income from the property as it concerns the beneficial ownership so is normally used to maximise income tax liabilities. I am under the impression that it does not affect any other type of taxation e.g. CGT. If the property is jointly owned then the legal ownership remains at 50:50. Each joint owner will be able to use their annual CGT allowance and will be liable for their 50% share of any CGT.

2. As you lived in the property for 10 years as your main home you may be able to further reduce any CGT liability. An accountant will be able to accurately calculate that CGT liabilty for you.