REV BN 22: Change to the Law on Jointly Owned Property

Who is likely to be affected?

1. Married couples who jointly own shares in close companies.

General description of the measure

2. Distributions (usually dividends) from jointly owned shares in close companies will no longer be automatically split 50/50 between husband and wife but will be taxed according to the actual proportions of ownership and entitlement to the income.

Operative date

3. 6 April 2004.

Current law and proposed revisions

4. At present, income from property (such as company shares or a rented house) that a married couple owns jointly is treated for tax purposes as belonging to them in equal shares, in accordance with section 282A Income and Corporation Taxes Act 1988, unless an election is made under section 282B for the income to be taxed according to the actual proportions of ownership and entitlement to the income.

5. This change will mean that income distributions (normally dividends) from jointly owned shares in close companies (broadly small companies owned and run by five or fewer people) will be taxed on the husband and wife according to their actual ownership rather than in equal shares. For example, if the wife is entitled to 95% of the income from some jointly owned shares she will pay tax on 95% of the income from those shares. The guidance at IN115 and Form 17 will be updated to reflect this change.

Further advice

6. If you have any questions about this change, please contact Simon Williams on 020 7438 4420.

www.inlandrevenue.gov.uk