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Nev M

Help with Deed of Trust keeping tax man happy with the finance and Deposits

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Hi all, Firstly, apologies if answered elsewhere on the site and so many questions in one go.

First Question -Situation is I am married to my wife and we have our main home and a second home that my wife owned before we got married. We have not done a deed of trust on her old house as had fully owned her and still is. Any issues anyone can see here? The tax man seems happy with this over last 14 years to date.

Second Question -We are however buying another house to rent out under a Buy to Let mortgage in joint names.

We will get a Deed of Trust created by solicitor and submit form 17 but unsure on the split we can do. I wanted to give beneficial ownership of 100% to my wife and when I retire would move it back to a 50/50% beneficial ownership. Is there a problem with me giving 100% to my wife from a tax perspective as I see very often people have taken 99%/1% option? I did call the tax office and they said it was ok, but many are recommending I keep 1% and I don’t know why?

Third question - was to keep things legitimate we was intending that my wife will pay the mortgage payments, Agents fees and collect the rent to and from her account. Is this the best way forward for the tax man viewing the beneficial ownership?

Fourth question - does the Deposit compromise on the beneficial ownership / Deed of trust percentage we can do? We have savings in join accounts and my name and will pool them together into our joint account for the deposit on the house. Does the tax man ask who paid what proportion of the deposit as part of the Deed of Trust e.g. If we paid 50/50 deposit can we only go 50/50 on the deed of trust?

Last question - Also is it better to have the full deposit come out of the wife’s account if she will the 99% or 100% Beneficial ownership for the Tax man to be satisfied or does this not matter.

Kind Regards

Nev M

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Legal Owner = person(s) who own the property. i.e. the registered owner on the land certificate held at the land registry.

This can be different to the......

Beneficial Owner = person(s) who receives benefit/income from the property.

Q1. Your wife can own as many 2nd homes as she wants to. Providing there is no tax liability the tax man will not be interested. However, keep in mind that there may be CGT or inheritance tax liability at some point in the future.

Q2. Don't know. I have only ever heard of 99:1 .......However, whatever split you eventually use......you don't need a deed of trust for a 50:50 split. On joint ownership, without a deed of trust  the tax man assumes 50:50 automatically. So, you would just need to cancel the deed of trust to revert to a 50:50 split.

Q3. Presumably it's a joint mortgage. It won't matter what account it's paid from. The mortgage is associated with the legal ownership not the beneficial ownership. People usually find a separate account useful to help with completing tax returns at the end of the year. With the introduction of section 24 mortgage interest will become less of an allowable expense.

Q4. The deposit is associated with buying the property i.e. legal ownership......not beneficial ownership. So it has no bearing on the deed of trust.

Q5. The purchase deposit has nothing to do with beneficial ownership.

It's probably best if you get a solicitor (perhaps the same one who is handling your conveyancing) to arrange the beneficial ownership split. It usually costs a couple of hundred pounds.

Don't forget to keep a record of your buying costs and split the expense appropriately between CGT and income tax.

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