Spousal split

A client with his wife jointly owns a number of residential properties that are let out and with the current low interest rates he is now earning a significant profit from them despite having a large mortgage against them.

The properties and mortgage are in joint names. The husband is a higher-rate taxpayer and the wife has little other income.

The husband wants to transfer his share of the properties to his wife so that the letting profits are all taxable on her at lower rates of tax. In order to prevent a stamp duty land tax liability arising and to appease the mortgage company the mortgage must remain in joint names.

We are concerned that HMRC may challenge the deductibility of all of the interest in this scenario. Would the completion of a form 17...