Another CGT

[smythie]

I have a CGT question if anyone can help I would be grateful.

My Mother lived in a council flat which she purchased for 13K in 2001. I increased my home mortgage to raise the funds for her and obtained a declaration of trust from my solicitor to protect mey investment. Subsequently my Mother has had to move into shelterd accommodation but to do this we had to transfer the property into my name. I did this last year and the flat was valued at 70K. When I come to sell the flat what do I pay CGT on the 13K in 2001 or the 70K in 2005?

Thanks for any response.

Smythie

[Tax Accountant]

I have a CGT question if anyone can help I would be grateful.

My Mother lived in a council flat which she purchased for 13K in 2001. I increased my home mortgage to raise the funds for her and obtained a declaration of trust from my solicitor to protect mey investment. Subsequently my Mother has had to move into shelterd accommodation but to do this we had to transfer the property into my name. I did this last year and the flat was valued at 70K. When I come to sell the flat what do I pay CGT on the 13K in 2001 or the 70K in 2005?

Thanks for any response.

Smythie

The answer depends on the date when you became the beneficial owner of the property and not the legal owner.

In other words, did the property belong to your mother between 2001 and 2005? If yes, she may get caught by the care home fees legislation.

If it belonged to you from the beginning, your base cost is the original purchase price.

Ramnik

[smythie]

Thanks again Ramnik, but I am not sure what you you mean by beneficial and legal owner. My Mothers name was on the deeds from 2001 until 2005 when they where transfered to my name. No money exchanged because I gave her the initial purchase price in 2001. I am not worried about the care home legislation as we have met the criteria set by the coulcil on entry to the sheltered accommodation.

smythie

[Tax Accountant]

Thanks again Ramnik, but I am not sure what you you mean by beneficial and legal owner. My Mothers name was on the deeds from 2001 until 2005 when they where transfered to my name. No money exchanged because I gave her the initial purchase price in 2001. I am not worried about the care home legislation as we have met the criteria set by the coulcil on entry to the sheltered accommodation.

smythie

Did you tell the Council that the house actually belonged to your mother until 2005 when she transferred it to you for nothing?

The fact that the deeds were in your mother's name means she was the legal owner. But this may have been necessary to qualify for the discount on the purchase price. In the absence of any other agreements or declaration of trust stating otherwise, your mother would be regarded as also the true owner (beneficial owner) of the property until it was transferred / gifted to you in 2005. If so, your base cost would be the value in 2005.

In your original posting, you stated: I increased my home mortgage to raise the funds for her and obtained a declaration of trust from my solicitor to protect my investment.

The declaration of trust may contain a statement to the effect that you are the real owner notwithstanding that the deeds are in your mother's name. If so, you are the real owner (beneficial owner) and this takes priority over the legal owner. In this case your base cost would be the original purchase price.

On the other hand, the declaration of trust may only contain a statement saying that you have provided the deposit of £x and that this is a loan by you. In this case, your mother would still be regarded as the true owner until 2005.

To conclude, the answer really depends on what the declaration of trust actually protected, either your ownership of the house or your loan to your mother.

Ramnik

[smythie]

Thanks Ramnik your advice is invaluable. Just to answer your question, the council only wanted to know that my mother had no property registered in her name at the land registry, they never asked for anything else!

I will have to check the detais of the declaration of trust for the details of ownership.

Thanks again.
Smythie

[Tax Accountant]

Thanks Ramnik your advice is invaluable. Just to answer your question, the council only wanted to know that my mother had no property registered in her name at the land registry, they never asked for anything else!

I will have to check the detais of the declaration of trust for the details of ownership.

Thanks again.
Smythie

People are not normally able to avoid care home fees by transferring properties to relatives before they claim for care home fees. If they did, Councils have legal powers and take charge over properties and / or force a sale even if the property has been previously transferred to relatives.

In your case, it is not clear if the council were told all the facts.

I would have thought that you should be OK for care home fees if the declaration of trust meant that the property actually belonged to you from the beginning. But then you would get caught by CGT as your base cost would be the purchase price in 2001.

Ramnik