Did Your Solicitor Set A Trap For You?
OnTax Accountants In Dunfermline is advising property investors to watch out for new tax traps inadvertently set up by solicitors and the Land Registry. OnTax Accountants In Dunfermline found that lawyers are encouraging all joint property buyers to sign an "express declaration of trust" detailing their percentage of ownership.
We also learned that the form is then filed with the Land Registry as evidence if any dispute about joint ownership arises should the couples relationship break down.
This change is the result of two recent court cases which involves unmarried couples, arguing over money and property when their relationships ended. We discovered that the Law Society and Land Registry want solicitors to encourage buyers to sign the declaration. However, tenants-in-common who switch percentage shareholdings to cut tax for a higher rate taxpayer in the relationship could face issues with HMRC. If they mismatch taxable rental profits or losses with the percentage written on the list, they might face fines and surcharges for filing inaccurate tax returns. We suggest that property investors should know that the Land Registry database is linked to HM Revenue & Customs and the forms could end up triggering tax inquiries. Many couples jointly own investment property and split the profits 50:50 which poses no problem for taxpayers.
Yes! Property Investors Are The Victims!
High value tax-payers must realize that signing more than fifty percent of ownership to a spouse or partner will make them give up all financial rights to income generated by that share of the property and any funds arising from the sale or transfer.
We have learned that signing the declaration is not compulsory but failing to file the form could also spark an inquiry over joint ownership of an investment property from the tax man. Necessary regulations and following recommendations can make the tedious process of property acquisition even more tedious, but it is also a double edged sword as it serves as a form of protection should the couples relationship decline.
Verify With Your Solicitor What Details He Is Recording On The Land Registry
Be Extra Cautious When It Comes To Property Purchase Transactions!
The Law Societys' current land law committee chairman, Mr.Jonathan Smithers says that the note would directly solicit the practical implications of statements made in recent cases so that their clients can continue to receive the best advice possible.
We discovered that in both the court cases Stack v Dowden [2007] UKHL 17 and Jones v Kernott [2011] UKSC 53 joint owners disagreed on the details of property ownership. We believe that by following the guidelines and recommendations, one can get through such problems and hold property in a way that wont cause sleepless nights!
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