Thursday, 19 September 2013

Succession planning for EU residents

A mini revolution is about to take place in the world of Will drafting for EU residents, including British nationals owning assets on the Continent.  Not many lawyers seem to be talking to their clients about it yet so naturally I want you, dear blog reader, to be among the first to know.
It’s all because of the EU Succession Regulation (Brussels IV), due to come into force for the most part in August 2015. 

Wednesday, 4 September 2013

Married couples and the Koshal case

The recent case of Koshal (Koshal and another v HMRC [2013]) provides a useful reminder that married couples need to take particular care when it comes to declaring income from most of their jointly owned assets.  Whilst husbands and wives are taxed as individual taxpayers, this is a classic example of where a joined up approach is needed – tax advisers to husbands, but not their wives, and vice versa, take note! 
If a living together married couple jointly own a property that generates rental income, they will be taxed on the rental income in equal shares. This is so even if their contributions to the purchase price were unequal.  However, if one spouse is a higher rate taxpayer and the other a basic rate taxpayer, it would be more income tax efficient for the basic rate taxpayer to be taxed on more of the rent.  This can only be achieved by the couple signing a declaration of trust to effect the change to unequal shares and then submitting HMRC’s form 17 by way of notice to HMRC of the change.  This needs to be done within 60 days of form 17 being signed.  As Mr and Mrs Koshal found out, nothing else will do, not even giving sole responsibility for managing the property portfolio to Mrs Koshal and paying all the rental income to her.