Sep

Property Partnership Between Spouses

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I have read with interest the articles on forming a property partnership as a way of allocating profit to a partner on a lower tax band. I have also purchased and read the “Guide to Forming a Property Partnership” which was very helpful and I think this would suit us. My husband and I jointly own and rent out 2 properties in Scotland. He works and pays tax at the higher rate whereas I am not employed. When we come to fill in our tax forms we have to pay a large amount of tax on my husbands share of the income.

Since we live in Scotland it does not seem possible to use a Deed of Trust to move most of the ownership into my name. It seems that here we have to do normal conveyancing and that involves mortgages so is not really an option for us.

The partnership option does look like a way forward. I looked at the form SA400 and there are a couple of questions that I would like advice on.

1. “What is the nature of the business”. What would other users suggest I put in here to have the best likelihood of it being accepted as a business by HMRC? I was thinking of putting “Property rental including management, maintenance and tenant sourcing”. Does anyone have any better suggestions?

2. What date do I put in the “When did the business commence” box? According to the form it looks like the earliest date I can enter is 6th April 2016, as it says I have to register by 5th October in the business’s second tax year or there could be a penalty. We have been doing the work for 4 years. Would this be the best date to put in?

Also, while reading about this on various sites I read somewhere that partnerships between married couples still have to allocate the profit either 50-50 or in the actual ownership share whereas non-married partnerships can allocate profits as they wish. Is this correct? If it is then the partnership would not help us.

I am hoping that there are others out there who have already taken this step and can provide some insight for me.

Thanks

Angela

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