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Where Taxpayers and Advisers Meet

Help with property CGT

arjunb88
Posts: 13
Joined: Thu Mar 02, 2017 6:55 pm

Help with property CGT

Postby arjunb88 » Wed Apr 05, 2017 4:37 pm

Hi all,

A question on behalf of a family member

person 1 owns one home (A), and also a second (B) with a friend person 2 of his.

person 2 has that (B) home as their primary principle residence and owns no other properties.

person 1 owning home (A) has named that as his primary principle residence.

both now wish to sell home (B), are there only CGT liabilities for person 1 at they are selling what is not their primary principle residence?
Therefore does person 2 get primary residence relief on the 50% they own of the property + their £11,000 limit. I.e. will there be CGT only on 50% of the gain?

Thanks for the help

maths
Posts: 7561
Joined: Wed Aug 06, 2008 3:25 pm

Re: Help with property CGT

Postby maths » Wed Apr 05, 2017 7:29 pm

both now wish to sell home (B), are there only CGT liabilities for person 1 at they are selling what is not their primary principle residence?
Correct.
Therefore does person 2 get primary residence relief on the 50% they own of the property + their £11,000 limit. I.e. will there be CGT only on 50% of the gain?
Correct although £11,000 to shortly be £11,300.

arjunb88
Posts: 13
Joined: Thu Mar 02, 2017 6:55 pm

Re: Help with property CGT

Postby arjunb88 » Fri Apr 07, 2017 4:52 pm

thank you

Berkshire45
Posts: 3
Joined: Tue Apr 18, 2017 4:53 pm

Re: Help with property CGT

Postby Berkshire45 » Wed Apr 19, 2017 10:26 am

I have a very similar situation, person 1 owns property A and lives in it.
person 1 also half owns property B
person 2 owns the other half of property B but owns no other property.
property B has been rented since purchase in 2011.
now person 2 is moving into property B as main residence.

The property was intended to be solely owned and occupied by person 2 but they could not get a mortgage so person 2 was used to obtain mortgage and had to be added to the deeds.

The property rental is collected by person 2.

How can property B be solely assigned to person 2 for main residence (CGT) purposes as person 1 was solely for mortgage purposes.

someone
Posts: 383
Joined: Mon Feb 13, 2017 10:09 am

Re: Help with property CGT

Postby someone » Wed Apr 19, 2017 1:14 pm

Via a declaration of trust person 1 can declare that he or she holds the legal title on behalf of person 2 who holds the beneficial interest.

Note that because there's a mortgage you have to be very careful that this doesn't trigger an SDLT charge. Additionally, there may be a CGT charge.

You say person 2 has been receiving all the rent. It's possible, therefore, that person 2 has always held 100% beneficial interest in the property but this should have been properly declared originally. Whether you can create a trust now that formalizes the informal agreement that might have been in place is something a solicitor can help you with.

Did person 2 claim mortgage interest relief when it was let? That might point to person 2 also being responsible for the mortgage.

It is particularly important for person 1 to realize that if person 2 holds 100% beneficial interest then in the event of selling the property, person 1 (might) be responsible for discharging (some of) the mortgage without being entitled to any proceeds of the sale to do that. Therefore sorting this out is not something to be done DIY.

maths
Posts: 7561
Joined: Wed Aug 06, 2008 3:25 pm

Re: Help with property CGT

Postby maths » Wed Apr 19, 2017 4:00 pm

In such a situation all that was required at the time of purchase was for P1 and P2 to take out the mortgage, both as a consequence appearing on the legal title, and for both to then simply execute a declaration of trust under which P1 and P2 declare that the legal title is held as to P2 100% beneficially.

Indeed the solicitor should have asked how the property was to be held, given the facts, so as the information could have been recorded on the TR1 lodged with Land Registry.

Assuming none of the above happened, it may still be possible to successfully argue that P2 only holds, and has always held the beneficial interest depending upon the facts.


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