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As a general rule, assets owned by spouses in joint names are treated by the Taxman
as shared equally by both partners, and any income produced will be taxed accordingly. But where actual ownership of an asset differs from 50/50, a married couple can elect to be taxed on their actual share of any income it produces. However, until 2011 the Taxman would not accept an election for unequal ownership in respect of bank accounts. His view was that any interest a joint account produced must be declared and taxed on a 50/50 basis because the money in joint accounts is equally accessible to both spouses. In practice, where both spouses pay in and withdraw money from an account, it can be virtually impossible to say how much of the balance belongs to each. This means it’s also impossible to say how much interest each is entitled to. This problem can be overcome by spouses agreeing how much money in an account belongs to each of them. Use our draft agreement to indicate who is the beneficial owner of the money in your joint bank accounts and thus the extent to which interest is taxable on each of you. When you make an agreement you can submit a Form 17 election stating how the interest is to be allocated for tax purposes. A Form 17 can be viewed and downloaded from the HMRC website Download here. A Form 17 must be sent to the Taxman within 60 days of the date of declaration. This deadline will not be extended for any reason. Send a copy of the agreement with the Form 17.
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Following the recent announcement of headline settlement between the FSA and the major high street banks-Barclays, HSBC, Lloyds and RBS, there are going to be many businesses which are suffering financially because they had to enter interest rate swap schemes that are not now in their best interest.
Borrowers may not have fully understood or taken financial advice as to they where getting into at the time. Other businesses may have been given no option other than to have entered the scheme at the time. Most of these businesses are paying high interest rates that will make survival harder in times of low interest rates. When a loan was taken out with a swap, the interest rate is in effect fixed at a certain level. On reviewing the practice, the FSA found what it described as “serious failings” in many such agreements. Swaps became popular before the 2008-2009 downturn in the economy as they where offered by the Banks as protection against a possible rise in interest rates. They took many forms such as swapping variable for fixed rates and capping rates, and included complex financial products common within the financial markets but not suited to the “real” economy. This is the area of concern where Borrowers may have felt compelled to take a swap and told that if they did not they would not get the loan. It is felt that Banks may have failed in their duty to explain the concept of swapping rates properly. The rate of interest and the swap may simply have been imposed by the lender and a separate swap provider acting together, something tat the Borrower may not have realised. Most swaps where akin to modern “Casino Style” that Banks used instead of the face to face High Street transaction with someone the Borrowers knew and trusted. This is a welcome development for many businesses and I feel that if you where involved in changing from variable to fixed rates on the advice of the Banks. |
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