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Where Taxpayers and Advisers Meet

Any Liabilities From A Long Delayed Transaction

neilrowe
Posts: 3
Joined: Fri Sep 25, 2015 8:47 pm

Any Liabilities From A Long Delayed Transaction

Postby neilrowe » Fri Sep 25, 2015 9:03 pm

I bought a house with my sister in 2005. We lived in it together from 2005-2010.

In 2010 she moved out, and I bought her out by transferring half the value of the flat to her bank account.

We did not transfer the deeds to avoid mortgage early repayment penalty fees. Unfortunately, we then forgot about it.

At present the flat is un-mortgaged.

I am assuming my sister will honour the fact that I paid her for half the flat.

The flat value has gone up a lot (more than CGT personal allowance thresholds) since I paid her for half the flat.

I am planning on selling the flat and using the full value, plus savings, to buy a house which will be entirely in my name.

Will my sister be liable for CGT?

- I spoke to an accountant, and they said yes she will, as her name is on the deeds and it is no longer her primary residence.
- A solicitor said no she won't, as I own half legally and the other half "in equity".

Is there anything else I need to be aware of?

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: Any Liabilities From A Long Delayed Transaction

Postby King_Maker » Sat Sep 26, 2015 10:32 am

The accountant is wrong.

The solicitor is correct.

Have you read HMRC's Help Sheet HS283 on the subject?

http://www.hmrc.gov.uk/helpsheets/hs283.pdf

[For disposals after 5 April 2014, the exemption for the last 36months of ownership is reduced to 18 months.]

neilrowe
Posts: 3
Joined: Fri Sep 25, 2015 8:47 pm

Re: Any Liabilities From A Long Delayed Transaction

Postby neilrowe » Sat Sep 26, 2015 5:13 pm

Thanks for the information. I had a read through HS283, but can't find an example similar to my situation. Where could I find more information on my situation?

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: Any Liabilities From A Long Delayed Transaction

Postby King_Maker » Sun Sep 27, 2015 9:10 am

The position for both of you seems very straight forward on the information supplied.

You own 100% of the property since 2010 (assuming there was no agreement to share any future rise in value).

It has been your PPR since its purchase in 2005.

The gain is exempt from CGT.

Your sister's gain (if any) in 2010 would have been exempt as it was her PPR throughout.

neilrowe
Posts: 3
Joined: Fri Sep 25, 2015 8:47 pm

Re: Any Liabilities From A Long Delayed Transaction

Postby neilrowe » Sun Sep 27, 2015 11:02 am

Thanks for the reply. Just to confirm (as this has caused me a lot of stress)...

Even though my sister's name is on the title deeds, the fact that I paid her for half of it in 2010 means that it is legally mine and that she therefore will not be liable for CGT?

King_Maker
Posts: 6538
Joined: Wed Aug 06, 2008 3:22 pm

Re: Any Liabilities From A Long Delayed Transaction

Postby King_Maker » Sun Sep 27, 2015 11:19 am

It is the Beneficial ownership not Legal ownership which matters for CGT.

http://www.hmrc.gov.uk/manuals/cgmanual/cg11730.htm


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