CGT help needed (Trust Deeds)

[brookslrj]

All. I wonder if you can help me.... I'll try to include all of the facts.

I have recently purchased a house which I have finished renovating and am in the process of selling. I am likely to make a capital gain of around 30k.

This house was purchased in my name only (mortgage and deeds) although the funds originally come from a remortgage on our main residence. (to further complicate things the equity withdrawn from our main residence was via a remortgage at which point we put the main residence in the wifes' name only).

To reduce CGT I know wish to put this renovation property in joint names to utilise both CGT allowances. Is there any way to do this other than to approach the mortgage company and get her added on? I am told by Mortgage Express that this process could take up to 8 weeks!.

I have read about "Trust deeds" but can't find information on these that looks relevant. Assuming I can find this information and get one drawn up can anybody tell me whether the Inland revenue recongnise these or will they see it as a deliberate attempt to minimise CGT liability (which it unashamadly is!!!).

Any help greatly appreciated...

Thanks

[Tax Accountant]

All. I wonder if you can help me.... I'll try to include all of the facts.

I have recently purchased a house which I have finished renovating and am in the process of selling. I am likely to make a capital gain of around 30k.

This house was purchased in my name only (mortgage and deeds) although the funds originally come from a remortgage on our main residence. (to further complicate things the equity withdrawn from our main residence was via a remortgage at which point we put the main residence in the wifes' name only).

To reduce CGT I know wish to put this renovation property in joint names to utilise both CGT allowances. Is there any way to do this other than to approach the mortgage company and get her added on? I am told by Mortgage Express that this process could take up to 8 weeks!.

I have read about "Trust deeds" but can't find information on these that looks relevant. Assuming I can find this information and get one drawn up can anybody tell me whether the Inland revenue recongnise these or will they see it as a deliberate attempt to minimise CGT liability (which it unashamadly is!!!).

Any help greatly appreciated...

Thanks

I would advise you to see your solicitor and instruct him to draw up a Deed of Trust so that the property and the mortgage secured thereon are beneficially owned by both of you, notwithstanding that these are in your name only.

Provided that the Trust Deed is properly drawn up, and the sale of the property is not yet concluded, I don't see any reason why it should not be acceptable to the Inland Revenue, or your wife's divorce lawyers if it comes to that.

The point is that the Trust Deed is a legal document and should not be entered into without careful consideration. True, it's immediate and obvious purpose may be tax motivated, but equally it is valid for other purposes as well, eg, your wife would be able to block the sale if she wishes to do just that.

Ramnik

[brookslrj]

Ramnik, Thanks for your response.

Yesterday I spoke with my accountant and the revenue as well as doing a bit of searching around the IR website. I found the following document which did shed a bit more light on things:

CG22020 - Transfer of assets: husband and wife or civil partners: jointly held assets
It is common for title to the assets of a married couple or of civil partners of each other to be held by one of them on behalf of both. The person chargeable on the disposal of an asset is normally the person who is the beneficial owner of that asset, see CG10720. But the legal title may not reflect the beneficial ownership.

Their advice to me was that I just need to submit the Form 17 (if beneficial ownership wasn't 50:50) and wouldn't bother even bother with the Deed of Trust. I do like the idea of the Deed of Trust as well as the revenue may require legal proof if they ever investigate anything in the future. Given that my solicitor would charge about £80/£100 for the deed this seems a worthwhile investment even if not strictly necessary.

In summary therefore I think I will go for a deed of trust and submit the Form 17 as well for a belt and braces solution.

I assume the Form 17 needs to be submitted prior to completion (rather than exchange) and wondered if you knew?

Kind Regards

[Tax Accountant]

Ramnik, Thanks for your response.

Yesterday I spoke with my accountant and the revenue as well as doing a bit of searching around the IR website. I found the following document which did shed a bit more light on things:

CG22020 - Transfer of assets: husband and wife or civil partners: jointly held assets
It is common for title to the assets of a married couple or of civil partners of each other to be held by one of them on behalf of both. The person chargeable on the disposal of an asset is normally the person who is the beneficial owner of that asset, see CG10720. But the legal title may not reflect the beneficial ownership.

Their advice to me was that I just need to submit the Form 17 (if beneficial ownership wasn't 50:50) and wouldn't bother even bother with the Deed of Trust. I do like the idea of the Deed of Trust as well as the revenue may require legal proof if they ever investigate anything in the future. Given that my solicitor would charge about £80/£100 for the deed this seems a worthwhile investment even if not strictly necessary.

In summary therefore I think I will go for a deed of trust and submit the Form 17 as well for a belt and braces solution.

I assume the Form 17 needs to be submitted prior to completion (rather than exchange) and wondered if you knew?

Kind Regards

Form 17 is normally talked about in the context of assessing rental income and not capital gains tax. Also it is usually applicable where the property is actually already held in joint names. In this case it is assumed that the joint ownership is in equal shares, ie 50:50 unless you notify otherwise to the Inland Revenue on form 17.

Your case is slightly different in two respects:

(1) Your property is held in your name only and not in joint names;

(2) You are looking at the Capital Gains Tax position rather than Income Tax position.

I would advise you to effect a Trust Deed and then complete your and your wife's returns for rental income on the joint ownership basis from the date the Trust Deed is effective. If your joint ownership is on a 50:50 basis, you do not really require Form 17. If you do send one in, I suppose there is no harm done.

When the property is eventually sold, you will of course complete the Capital Gains Tax pages on the basis of joint ownership.

Strictly speaking, you need to effect the Trust Deed BEFORE you exchange contracts.

Ramnik