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Where Taxpayers and Advisers Meet

Tenants in Common, PPR and Divorce

brianjones
Posts:2
Joined:Mon Jun 25, 2018 2:34 pm
Tenants in Common, PPR and Divorce

Postby brianjones » Mon Jun 25, 2018 2:49 pm

I realise this topic has been visited a few times before but I can't find an answer to this exact case. Salient facts:

- Family home acquired as Joint Tenants in 2005 for 600K, now valued at 1.5m
- Separated (I moved out of the above home to rented property) February 2017, Decree Absolute May 2018
- Former Spouse remains in home and will continue to do so; I am currently in rented property still

In the divorce settlement there is a condition that the home be placed in Trust for 100% beneficial ownership of my former spouse upon issuance of the Decree Absolute. At such time as the mortgage is paid off (likely 2020) the house will then be transferred into her sole ownership. (This is principally for estate planning purposes.)

Questions:

1. Would moving the property from JT to TIC be viewed by HMRC as a "disposal" for CGT purposes, especially given the proportions of beneficial ownership have gone from (implied) 50:50 under JT to 100:0 under TIC ? If that is the case, would that mean I would incur a CGT liability in the tax year 17/18 (the period in which we separated) vs 18/19 (the period in which the Decree Absolute was issued) ?
2. In registering the Form A restriction and severing the JT with the Land Registry, I assume both parties would still be named on the Title Deeds ? There will be a deed of trust submitted with the Form A showing the proportional ownership under the TIC. That being the case, I assume that a further conveyance would be required as such time as the Title is transferred to sole legal ownership of my former spouse.
3. If I stay in rented property, I assume I can still claim the family home as my PPR and claim relief according, deferring any potential CGT payable from February 2017 until such time as I buy a house and explicitly declare that as my PPR ?

Thanks in advance for your help,

Brian

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Tenants in Common, PPR and Divorce

Postby maths » Mon Jun 25, 2018 5:01 pm

It seems you and ex-wife hold legal title jointly; this must be as joint tenants. You are also both joint mortgagors.

Presumably the legal title has been held by you/ex-wife on trust under which you each have a 50% beneficial interest in the property (as joint tenants).

At date of decree absolute you are required to transfer your 50% beneficial interest to ex-wife so she then has complete beneficial ownership i.e. 100%. There is no transfer from joint tenants to tenants in common.

You both continue to hold the legal title as above until mortgage paid off at which time she will then also become sole legal owner and your name will be removed from the legal title.

For CGT you made a disposal at date of decree absolute. In principle a CGT charge arises on any gain but private residence relief will no doubt cause the gain to be exempt (TCGA 1992 s225B).

brianjones
Posts:2
Joined:Mon Jun 25, 2018 2:34 pm

Re: Tenants in Common, PPR and Divorce

Postby brianjones » Mon Jun 25, 2018 5:09 pm

Thanks for quick response maths. All makes sense but therefore I have one question: how would I effect a transfer of my 50% beneficial ownership without a) severing the joint tenancy, and b) not changing the legal title ? I realise that may be more a legal than a tax question but if you happen to know how this would be handled, I'd appreciate it. Thanks, B.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: Tenants in Common, PPR and Divorce

Postby maths » Mon Jun 25, 2018 6:36 pm

Co-owned land is held under a trust and legal title can only be held as joint tenants.

At present you/ex-wife as legal owners hold the property in trust for each of you beneficially (as to 50% each) as joint tenants.

Following the decree absolute as legal owners a new declaration of trust needs to be executed under which it states that you/ex-wife as legal owners/trustees now hold the property as to 100% beneficially for your ex-wife. In essence, the previous beneficial ownership as to 50% each as joint tenants simply falls away; effectively, the previous joint tenancy has been severed automatically.


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