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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: Specific types of property: shares: example 4: joint names of married couple - 50/50 rule does not apply

In 2009-10, A and B, a married couple living together, hold 1,000 shares in a close company X in their joint names. A claims that the dividends should be taxed on B only, as she has transferred beneficial ownership in all the shares to B.

From 6 April 2004, the 50/50 rule does not apply to income arising from shares held in a close company (TSEM9822).

Where there is property held in joint names, the normal presumption of joint tenancy applies, unless it is displaced (TSEM9230). In this case a valid declaration of trust has been made that transfers beneficial ownership of all the shares from A and B to B outright. Because the property is not a type to which the 50/50 rule would potentially apply, form 17 (TSEM9842) is not used.

The dividends are taxable on B. The Settlements legislation may apply to tax A where the shares are property which is wholly or substantially a right to income (TSEM4205).