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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: introduction - nature and scope of the guidance

This guidance is about ownership and the taxation of income from property. Guidance on ownership and CGT can be found in the Capital Gains Manual and on ownership and IHT in the Inheritance Tax Manual.

This guidance is located in the Trusts, Settlements & Estates Manual because

  • in general law there are two types of ownership - legal and beneficial (see TSEM6018); if the legal owner and the beneficial owner are not the same person, the legal owner holds the property on trust for the beneficial owner
  • where there is joint ownership of property, there is always a trust.

The guidance is aimed primarily at staff in Local Compliance dealing with claims or enquiries about ownership or joint ownership and income tax, and how it affects the taxation of individuals, but it may be useful to others. It deals with claims by taxpayers that some sort of trust exists unlike the usual trusts that HMRC Trusts & Estates Offices deal with.

The guidance covers ownership in the context of the taxation of rental income, interest on bank and building society accounts, and dividends, and should enable you to deal with most such cases. For advice on other types of income from property refer to HMRC Trusts & Estates Technical Edinburgh.

The guidance does not apply to trading income, as this is not income from property.

The guidance is not concerned with non-tax aspects of ownership of land and buildings, such as the ownership of a matrimonial home (unless at some stage it is let out to rent). It is concerned only with the ownership of income-generating property that results in income tax liability.

The guidance covers the position under the law of England and Wales only. The position for individuals living in Scotland will be governed by Scots law, and may be different. The Scottish legal system is distinct and separate from that in England and Wales so some of the legal concepts and terminology used in this guidance do not apply in Scotland. The position for individuals living in Northern Ireland may also be different. Claims or compliance checks that relate to individuals living in Scotland or Northern Ireland should be referred for advice to HMRC Trusts & Estates Technical Edinburgh.