Deed of Assignment of Beneficial Interest - Split Rental Income with Spouse

Dear HMRC I am the legal and sole owner of a BTL mortgaged rental property and want split the rental income with my wife (90% to her and 10% to me). I have established so far that: 1. This can be done by assigning a beneficial interest (rather than share legal title) to my wife 2. Assigning beneficial interest can be done with a signed/witnessed Deed of Assignment. 3. The Deed of Assignment does not need to be filed with HMRC 4. Form 17 is not required as the property is in my sole name ONLY 5. Once the Deed is signed, allowable operating expenses can also be allocated in the same ratio 6. NONE of the mortgage interest can be allocated to her as the mortgage is in my name ONLY 7. I can still use 100% debt financing costs even though my share of income is 10% 8. No asset is being transferred with a DoA, so there is no CGT liability (and there would be none anyway between husband and wife) But….I would like to clarify the position on SDLT please. I believe that as there is no chargeable consideration with a Deed of Assignment (no asset has been paid for and mortgage debt will remain wholly in my name) then it follows there should be no SDLT liability. I would be grateful if you confirm if assumptions 1 to 8 above are correct please, and if there is no SDLT implication? Thank you

Hi,

1. Yes, you can assign a beneficial interest rather than a legal share.  
2. Yes, the deed needs to be signed and witnessed.
3. No, the deed does not need to be seen by us unless requested.
4. No, a Form 17 is only applicable to cases where a couple are married or in a civil partnership.
5. Expenses are allocated on the same ratio as the deed of assignment, that is, 10% to you & 90% to your wife,
6. The residential finance costs, previous mortgage interest, can only be claimed by the person who takes out the loan/mortgage. In this case you get to claim the full 100% not 10% despite the deed of trust only allocating you a 10% share in the income. Your wife can cannot claim any of the mortgage interest. All of the other expenses are still split 10% to you & 90 % to your wife as is the beneficial income. You can see guidance here: SAIM10030 - Relief for interest paid: general conditions: the claimant
7. No, the income and expenses are to be split in line with the beneficial ownership so in your case you can only claim 10% of the debt financing costs from the date in which the deed of trust was signed.  
8. Yes, there is no CG liability at the point of transfer as you are transferring beneficial interest through a deed of trust.  

You will need to contact our SDLT team for advice on any SDLT queries.
Stamp Duty Land Tax
Thank you

Dear Admin 19
Thank you for your reply - that is very helpful.
I have a further due diligence question please:
I have read on other posts that such an Assignment of Beneficial Interest might fall foul of Settlements Legislation as defined in TSEM4015 (as the purpose of such assignment would be for tax efficiency as a married couple).
There is an example in TSEM9923 of a similar case covered by a 'trust deed', which suggests income is still taxable to the settlor.
But there is also a situation in TSEM4205 stating the legislation would not apply in an unconditional transfer between spouses not wholly of the right to income. Assignment of Beneficial Interest may be deemed not solely an assignment of income, as the beneficiary is also taxable on capital gain upon disposal - so similar to the case ITTOIA/S626 which includes entitlement to capital.
HS270 also suggests similar "There are a number of transactions or arrangements which are not treated as settlements.
These are:
outright gifts between spouses or civil partners — but only if the gift is not just of income, or mainly income (so the underlying capital is also transferred)."
Could you please clarify if my reasoning is correct and the above action would not be caught by settlements legislation?
If so, I would presume a 90/10 split is still feasible as the the assignment of the 'share' would still comply to the requirement.
Is that correct?
This obviously requires careful investigation, so thank you in advance for any help.
Kind Rgds
DB

Hi dbradsh0208,
Thank you for your question. 
We cannot answer customer specific cases or deal with any further technical guidance or tax planning other than that we have already provided.
We would suggest that you either call our helplines via Contact HMRC or alternatively consider seeking professional advice.
Thank you