We had discussions this week relating to property held jointly between spouses and there are specific rules that should be considered if the asset is income bearing. If spouses or civil partners own property jointly, are married and live together, care should be taken. From an income tax perspective the individuals are treated as beneficially entitled to the income in equal shares. This means for example, if a property is owned jointly, even in differing ownership splits, not 50%-50% the income arising from this property would be deemed to be split 50%-50%.
However, individuals can make a joint declaration to HMRC indicating their unequal beneficial interests in certain cases which would change the split from the default 50%50% if:
a) one of them is beneficially entitled to the income to the exclusion of the other or
b) they are both entitled to the income in unequal shares
and their beneficial interest in the income CORRESPONDS to their actual beneficial interest in the property from which the income arises.
A declaration has affect if the notice is given to HMRC within a period of 60 days of the declaration.
It is therefore really important for such assets to be looked at and a declaration made if necessary. Individuals should take care…it is not enough to own the asset in unequal shares, this needs to be reported to HMRC if income is to be assessed in ownership share proportions.