If a property is jointly owned between spouses, do you need to file a form 17 to HMRC?
The confusion around this question became a sharp focus recently when a client engaged us to confirm the position for him, prompting us to write this article.
As with many tax matters, the devil is in the detail. Unfortunately, through no fault of your own, like many people reading this, you may have found there to be conflicting advice on this matter, not least from HMRC’s forums. You will find posts that confirm the Form 17 is not needed for a property that isn’t owned jointly and posts which does confirm that a Form 17 is required.
From our extensive experience with HMRC on this matter we know that a Form 17 will be required, at all times, for spouses, regardless of whether the property is owned jointly, or solely, before we complete the Deed of Trust. This is set out in for the following guidance:-
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9851
https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9230
The first link states what the procedure is for jointly owned property between spouses.
But what if only one spouse is the legal owner of the property and you want to complete the Deed of Trust to indicate that both spouses will now be the beneficial owners of the property based on the proportions listed in the Deed of Trust? In this situation, it is a legal requirement of the spouse who solely owns the property legally, to submit a Form RX1 to the Land Registry to update the ownership of the property. This is commonly known as a Form A Restriction and this is then placed on the title register by the Land Registry.
The Form RX1 will contain the following restriction “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorized by order of the court.”
This has the effect of ensuring that the property will now be treated as being held jointly as tenants in common for tax purposes. This is highlighted at point 2 of the second link.
Given that the property is now held jointly for tax purposes, presuming the above steps are followed correctly, which clearly is not happening with some advisers, we simply have to follow the guidance as per both the first link and points 1 and 2 of the second link. This clearly states that for property owned by spouses, we must file a Form 17 to HMRC within 60 days of signing the Deed of Trust.
When submitting Form 17 to HMRC we have to provide them with evidence of the uneven split and we do this by supplying them with a copy of the Deed of Trust.
If you need to implement a Deed of Trust, the correct implementation is vital. Otherwise, you are leaving yourself open to an enquiry by HMRC and giving them an open goal. Get in touch if you have any doubts or need help.
Please contact us if you have any further questions regarding your landlord accountancy queries, by getting in touch at 0800 907 8633, by sending an email to enquiries@uklandlordtax.co.uk or via online contact form to speak to one of our specialist tax advisers.
If you found this article helpful then why not try our Welsh stamp duty calculator or read our article on income tax on rental properties next?
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