CGT/equity release gifting property

[jrkhany]

we bought a house about 6 years ago and my brother and his family lived in it for most of the period. There was no rent being charged since it was bought by the family together. It was always intended to be his house however it was bought in my name. I have never lived in the house however i would like to transfer this house over to him, gift it etc. What are the tax implications would i be liable for CGT or would he be liable when he eventually sells it. Or are they any other methods ie equity release we can use. If any body can help me with this or any professionals I am willing to pay for advice about the best strategy.

[JSK TAXATION]

jrkhany,

Subject to the very limited information provided, and notwithstanding the nature of any formal documentation covering the arrangements, I think it very much arguable that a contructive trust exists.

In this case, you are merely holding the property on trust for your brother, and his occupation of the property as his main residence should qualify for CGT relief under s225 TCGA 1992.

If you would like me to handle this for you including the transfer, let me know. Kind regards,

John S King
Chartered Tax Adviser
www.taxation-advice.com

[Lee Young]

It sounds as though the purchase was by you asa trustees for your brother, and always beneficially the property has been his rather than yours.

I would suggest you simply transfer the legal title to him as no tax liability will arise. It would also be useful to record the beneficial ownership of the property as always having been with your brother and ideally this is done before the tansfer by way of a declaration of trust drawn up by a solicitor.

lee.young@clarkewillmott.com

[jrkhany]

Thanks for the replies. As far as any paperwork goes there was no trusts or formal documentations etc set up at the time the property was merely bought in my name at the time due to it firstly being next door to the parents house and it came up on the market and secondly I was in a financial position to pay for it and with the intention of either me or my brother living in it in the future. Since this was next door to the parents house it made sense for us.

[JSK TAXATION]

jrkhany,

Notwithstanding Lee's follow up to my post, I think it would be wise to deal with the tax issues now rather than wait for any problems to arise in the future. A simple letter to HMRC explaining the nature the arrangement should suffice to preclude any CGT having accrued by virtue of the property not being used as your main residence.

Without covering this angle, it could be argued that there is CGT and IHT implications in respect of the proposed transfer back into your brother's name.

Kindest regards,

John S King