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TaxVince, Accountant
Category: UK Tax
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Experience:  Chartered Accountant >20 years + Qualified IFA
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Dear Sir or Madam, Id appreciate your advice on the following:

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Dear Sir or Madam,
I’d appreciate your advice on the following: My husband and I are non-UK residents and we don’t plan to live in the UK. He wants to sell his only buy-to-let property in England, which he solely owns. He has accumulated substantial rental income losses and currently owns no other property in the UK. I currently own 3 buy-to-let properties in England which are in my sole name. In order not to lose the facility to carry forward his losses, we would like to transfer one property of mine to my husband via a Declaration of Trust. (The alternative option to transfer the title deeds would be complicated, as it would involve asking my mortgage providers to agree to transfer the mortgage also.) We believe the Declaration of Trust should involve a 100% share for my husband, if this is possible, due to the following HMRC guideline: “If a taxpayer has let property of his own and is a member of a partnership which has rental income, losses of his personal rental business cannot be set against his share of the partnership's rental income.” -
Please advise us as to whether the above is an acceptable course of action.
We would also like to know if we should subsequently submit Form 17 to HMRC.
Thank you.

MamaTax :



Its MamaTax Here!

Thanks for the Question.

Property losses are not off-settable against other forms of income as you may already know. Therefore your husband’s rental losses can only be offset against future rental profits. These losses are effectively ring-fenced in the "property business" so can be offset against other property income for example if you have one profitable and ther other is not profitable property the losses can reduce the overall tax due. As long as he continues to have a property rental business those loses are off-settable.

To come back to your question, as long as he always have at least one UK rental property he will still have a UK property business even if the business is bought transferred from the wife. .What he cant do is to sell/transfer ALL the property (ies) otherwise he will lose the losses carried forward.

The quotation on your question refers to partnerships and not relevant in this case. Besides its well-known that property businesses buy new properties and sell some –otherwise no one would be able to claim the losses.


JACUSTOMER-qe763buw- :

Thank you for your reply. My questions, however, were specifically:


  • whether a Declaration of Trust would be acceptable to HMRC, as a means of continuing my husband’s property business, hence carrying forward his losses.

  • whether the Declaration of Trust could be apportioned 100% to my husband because, as I understand it, he can only carry losses forward against the same rental business, ie as sole trader, and cannot mix and match properties owned in his sole name with properties owned jointly.

  • whether we would be required to subsequently submit Form 17 to HMRC, given that my husband would be a 100% beneficiary, i.e. not sharing the benefits/costs with me.

MamaTax :

Apologies as i was away.

Thanks for your patience .Your husband is not on the deeds as you have sole ownership, hence Form 17 ios not necessary. However you should use a declaration of trust can then be used to apportion the beneficial interest in the property rather than add him to the deeds - simpler and cheaper. Give him 99% of the property so you retain a small proportion so that you will obtain letting relief in due course when you sell.When you come to sell, review the 99:1 position for its tax effectiveness.

JACUSTOMER-qe763buw- :

Thank you for your reply. Do you know if in a Declaration of Trust the beneficiary can be granted 100% of the transfer? This is important, because I have read that he can only carry his accumulated losses forward (from the property he'll sell) if he continues his property business as a sole trader. My concern is that my retaining even 1% of benefit would change the nature of his business, so that he would ne longer be classified as a sole trader.

MamaTax :

Thanks again for the reply

1. Yes you can use Declaration of interest documents to transfer 100% ownership without changing the deeds. This is effectively a trust document which needs to be properly written – get a good solicitor to draft one for you.

2. The rental losses incurred on the letting could be carried forward indefinitely to offset against any rental business future profit under the Income Tax Act 2007, look at S 118 and S 119. The limitations are placed on partnerships.


MamaTax :

Could you please let me know if you are answered. If not please drop me a message. If sorted please could you rate the question before you go.

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