What Is Form 17?
If you own a home with your spouse or partner and want to change the distribution of your taxable income, you must complete this form. The property of the spouses/marital partners is generally shared on a 50:50 basis, but Form 17 can be used to notify HM Revenue & Customs of your intention to declare otherwise.
The form applies to UK homeowners and non-residents living abroad.
What Does FORM 17 Do?
You can file 17 Form if you want to change your income distribution to reflect your actual ownership interest, rather than treating it as if you owned the property 50/50. To change the division, you must prove in the form of a statement or writing that your financial interests do not differ.
When Should You Complete This Form?
You must complete this if:
● are married or civil partnership couple; ● own your property as tenants in common ● own the property in unequal shares.
When Do I Need to Complete Form 17?
When real estate is owned at all times, owners pay taxes based on actual ownership and the default is 50:50, regardless of who owns it. However, an exception occurs when married or partnership couples own real estate. If you live with a spouse or cohabitant and have joint property income, you can change the distribution of income on your rightful ownership interest, and thus the taxable tax you pay on the home gains.
For example, if the real estate is 80:20, you must show that your economic interests in the real estate are unequal (by declaration or deed) and complete Form 17 accordingly. In short, Form 17 must be completed if you own real estate, are entitled to receive income from those shares, and wish to notify HMRC that you wish to pay taxes.
When filing Form 17, you must declare your real interest in jointly owned real estate and the profits generated from that real estate.
What Is a Beneficial Interest?
Rental income can be split unequally between a couple, meaning that once the rent is received, one party can claim a larger share than the other to apply a lower tax rate. The division of economic interests can be anything that both agree on; like 50:50, 99:1 or even 100:0.
Income tax must be paid on the rent after interest rebates. If Party 1 is listed as the sole legal owner, but Parties 1 and 2 share the effective interest rate by 50% or an odd amount, taxes are due on each party's actual interest. If 50% of the interest income is equal to each Part 1 and Part 2, then 50% of the rental income from the property is calculated for each of their income for tax purposes, regardless of whether they legally own the property.