cgt on property

[Fred Flintstone]

Hi,

A couple of years ago I assisted my son to purchase a residential property to renovate and sell on at a profit. He was in work at the time so he could not be at the property often so all of the payments for services (builders etc) were made by myself on the basis that I would recover these when it sold and he would take any profit. I did some basic work at the property myself (painting etc) but I did this without any payment. Some of the invoices are in his name and some in mine (together basic with receipts from purchases from shops for paint etc for which there are shop receipts)

In short I lent him the money to purchase the property ( which has been paid back and recovered direct from the solicitor) and I fully funded for the services (which he will repay in full from the sale). I have not made any money from the property myself and do not intend to charge him anything.

The property has now sold and I have been repaid the original price of the purchase but not the cost of the works.

Am I able to prepare a simple invoice for the expenses of the works and contractors etc or do I need to go into more detail and is there likely to be an issue with the way I have gone about this with an accountant when preparing his tax return?

Many thanks in advance for any input

[bd6759]

Sound like you and your son could have been in partnership. What you did goes beyond being a lender, but it could be arguable that the help (beyond the loan) was done as a father and not as an investor.

It really ties down to the agreement you had with your son. Hopefully it will be evidenced in writing.

[bd6759]

The profits are chargeable to income tax. Not capital gains tax.

[Fred Flintstone]

Thanks for your input.

How would be the best way to recover/invoice my son to recover the outgoings?

[maths]

I would be inclined to the view that there was no partnership between you and your son.

Your son is liable to income (not capital gains) tax on any profit.

I assume your son had a bank account into which were deposited 100% of any sale proceeds.

Ideally there should have been some form of loan agreement with respect to the advance of monies to him to finance his original purchase, solicitor fees etc. This agreement should have set out the terms of the loan.

With respect to all other costs you would need to be able to demonstrate that these were discharged by your son directly or, if you discharged them, that he reimbursed you. As such, you need not raise any invoice on your son. Thus, for example, if a plumber did work but raised his invoice on you (not your son) and you paid it from your own resources you would simply hand the invoice over to your son who would then reimburse that cost to you (by transferring monies from his to your bank account).

If you actually did some work (eg wiring lighting) then you can either not charge him for your labours or you could raise an invoice charging him for your labours; in this case an invoice would be needed (assuming you charge him) as this would not be a reimbursement.

If you bought some paint and paid for it you could if you chose not to seek reimbursement simply gift your son the paint; in this case he would not then have a deductible tax expense.

[AGoodman]

A general partnership has to involve some intent to share profits. I agree this doesn't sound like a partnership.