Hi
I would be grateful for some advice please in respect of a CGT claim that HMRC are making against my Sister In Law (will shorten to SIL) and whether she should respond to requests for information from HMRC.
It's a little complex as this relates to a multi-year co-habitation dispute that was finally settled via mediation over 2 years ago:
- My SIL and her partner 'sold' approx. 50% of their primary residence to his parents in 2004 (i.e his parents paid £200k for a property valued near £400k)
- My SIL and her partner remained on the title deeds and the mortgage of the property
- His parents moved into the property and they moved into a new primary residence
- My SIL separated from him over 9 years ago now and only achieved settlement in April 2017
The mediation settlement resulted in an agreed Consent Order which stated that - in respect of the above property that his parents lived in - she would convey/transfer all of her interest in that property to him for the sum of £900. This would then involve releasing her from the joint mortgage or him getting out a mortgage in his sole name.
After a number of months, it was found that he could not release her nor secure a new mortgage so he asked to sell the property instead. He also did not have sufficient funds to pay what he agreed in the Consent Order so needed to sell the property to raise this capital.
This resulted in a revision to the Consent Order - sealed by the Court - which confirmed that he would pay / settle the claim from the sale proceeds of the property and that:
"...to the extent that either of the parties incur any liability in respect of CGT in respect of [specific property name] the Defendant (i.e. him) shall be responsible for discharging such tax and shall indemnify the Claimant (i.e. her) for any CGT she incurs in respect of the sale in joint names of [specific property name]"
My SIL has now received a questionnaire from HMRC as they believe she is liable for CGT from this sale - they have asked a number of questions around when the property was sold, purchase price, how much she received etc etc During their telephone conversation, HMRC actually said SHE was liable for the CGT and would need to chase her ex-partner to recover the funds...obviously this is not a viable course of action given it took 7 years to get to a settlement after they split!! Also, isn't the Consent Order legally binding as it was sealed by the Court....can HMRC just ignore that?
Should my SIL respond to the HMRC questionnaire as openly / honestly as possible or should she advise that the Consent Order means that she is not liable because her ex-partner indemnified her from any claim and is liable for all CGT? Just don't want to dig any holes by responding!
Thank you in advance
Rich
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