Readers’ forum: Dividing property interests

My client owns a rental property in his own name and is the legal and beneficial owner. He would like to transfer 49% of the beneficial ownership to his wife so that she can be in receipt of 49% of the rent. The legal ownership will stay 100% with him.

He has written a valid declaration of trust in accordance with the notes in HMRC’s Trusts Settlements and Estates Manual at TSEM9520 transferring 49% of the beneficial ownership to his wife.

We have been in protracted correspondence with HMRC about this. In its last letter to us the department writes that because our client is the 100% legal owner he is not able to change the beneficial interests.

I believe HMRC is forgetting what is said at TSEM9810 that the special rules for a husband and wife apply only when the property is in joint...