Divorce, Declaration of Trust, and Beneficial Ownership?

The "tax breaks" apply to the year of permanent separation. not the year of divorce.

Reply to the comment left by Olls63 at 03/03/2022 - 15:16
In this case, both the year of separation and divorce are in the current tax year 2021/2022.

As form 17 between spouses requires the legal ownership to match the income share, I'm not sure how HMRC would see this.

When a house is sold the capital gains tax paperwork would look at the legal owners registered at land registry. Tenants in common is only a term on the title deed which stops the house sale unless both people agree.

Personally if I was the X I wouldnt want my name on properties that were not mine, as I would potentially get hit with second home stamp duty as I would be on the titles of the buy to lets

Reply to the comment left by Chris Bradley at 03/03/2022 - 15:54Chris,
That's not my understanding for the use of Form 17.
By default, if you jointly own a property, HMRC will assume you own and have the beneficial ownership split 50/50.
If you own as tenants in common and split in unequal shares, by default the legal ownership and beneficial ownership are deemed to be in the same proportions as the share of ownership.
Form 17, alongside a declaration of trust, is used to split beneficial ownership in different proportions to legal ownership.
See, HMRC Tax Manual https://www.gov.uk/hmrc-internal-manuals/trusts-settlements-and-estates-manual/tsem9851

Reply to the comment left by Paul Hawkins at 03/03/2022 - 16:52
That is what I said the ownership split needs to match the income share.

Reply to the comment left by Chris Bradley at 03/03/2022 - 20:33
You said "When a house is sold the capital gains tax paperwork would look at the legal owners registered at land registry" which implies the opposite to what Paul said.
CGT always follows the beneficial ownership, not the legal ownership. See CG22020.

Reply to the comment left by Olls63 at 03/03/2022 - 20:40
But as HMRC will only allow spouses to split beneficial income in the same proportion as ownership share, then it will be the same.

Reply to the comment left by Chris Bradley at 03/03/2022 - 15:54Chris, do you have an HMRC Tax manual reference (or other reliable source) to support your statement that - "As form 17 between spouses requires the legal ownership to match the income share, I'm not sure how HMRC would see this."
This is exactly the opposite of what Form 17 is for. Its purpose is to split the allocation of beneficial ownership in a different way to the legal ownership. So it is possible to legally own a property split as 50/50 but split beneficial ownership 70/30 or 99/1 or in my case 100%.

Reply to the comment left by Paul Hawkins at 03/03/2022 - 21:45If property is owned in an unequal share then HMRC will still assume that the income is 50:50 unless a form 17 is submitted that tells HMRC to tax according to actual ownership.
The basic rule (As set out in s836 ITA 2007), which applies as long as the couple are married or in a civil partnership and living together, is that income from property held in both their names is split equally between them for income tax purposes. This applies regardless of whether they are actually entitled to benefit equally from the property. Such jointly held property might include land and buildings, savings accounts, certain shareholdings and intellectual property.
There are some exceptions to this rule including:
Income from partnerships
Income from furnished holiday lets, whether in the UK or overseas
Income from jointly held shares in a close company
Income from an asset held for the couple by a nominee
Where this basic rule does apply, a couple who own an asset where one party is beneficially entitled to (say) 90 percent of the asset and the other to 10 percent, would each be subject to income tax on 50 percent of the income from the asset. On a sale or other disposal however, the capital gains tax position would still follow the underlying 90/10 split. The inheritance tax position would also be split 90/10.
If the couple wishes to be subject to income tax on their actual beneficial ownership instead of on the deemed 50/50 basis, then they need to make an declaration using form 17.
Making a declaration using form 17 overrides the deeming rule. That means each of the couple is subject to income tax on their actual beneficial ownership. Making a declaration cannot change the beneficial ownership of the asset. If the couple owns the property 90/10, then they cannot use form 17 to declare a 25/75 split for income tax purposes.

Reply to the comment left by Chris Bradley at 04/03/2022 - 00:42
So form 17 doesnt allow you to split the income different to ownership, it simply tells HMRC to ignore the 50:50 assumption of spouses and to tax the income in the same proportion as ownership.

I used to own 99:1 and form 17 allowed us to be taxed in the same proportion, when circumstances I changed I gifted my spouse 29% of the ownership and then submitted form 17 to tell HMRC to tax us 70:30 and the ownership document was the proof they asked for