Dear All
A client of ours owns the legal title of a property which is in a trust along with 3 other siblings, each owning 25% share.
Our client for some reason is thinking of transferring the Declaration of Trust (legal title?) from his name to his brothers, but all the siblings retain the same 25% share as before.
In this scenario is there any Capital Gains Tax implication?
I hope my post makes sense, and look forward to hearing your opinions soon.
Replies (11)
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It sounds as if you may have a situation where your client has the legal title but holds the property on bare trust for himself and 3 siblings. That's not an uncommon situation. If that's the case, there's no trust gain - each individual is assessable on his share of the gain. A bare trust isn't a trust for tax purposes.
However, you need to find out a bit more, including getting hold of a copy of the declaration of trust, to find out whether what I've described above is what you have in your particular case.
If all you're doing is tranefrring the legal title and the uinderlying beneficial ownership stays the same, there are no capital gains consequeces.
Property (land)ownership
In substance it sounds as though MJS is correct re CGT.
The legal title to the land is owned by A. The beneficial (equitable) ownership is 25% each by A, B, C & D.
Check which happened:
(a) A, B, C & D bought the land from a third party X; and for some reason the conveyance (transfer) was to A only; perhaps with the conveyance including a declaration of trust (that A holds on trust for A, B, C & D in equal shares).
(b) A alone bought the land from a third party X; and later A made a gift to B,C & D and in consequence A signed a declaration of trust (that A holds on trust for A, B, C & D in equal shares).
Either way, (so I understand) A will now convey (transfer) the legal title to the names of all 4 of A, B, C & D, who will continue to hold the beneficial interest in equal shares.
I suggest ensure a solicitor drafts the transfer by A; and that it is structured do that no stamp duty is payable.
A quick check on the current position is to obtain a copy of the register of title from HM Land Registry. For the protection of B,C & D the existing register of title should make it clear that A alone cannot transfer title to outsiders [otherwise a buyer would not know of the interests of B,C & D and would hand over the purchase price to A).
After A transfers the legal estate to all 4, the names of all 4 will appear on the register of title as the registered proprietors.
Still can't fathom out what it is you are trying to acheive or what the legal position is.
Did father create a trust? or - did he gift to one son with a request that he holds on behalf of the other children. One is legally binding trust the other is an outright gift with a verbal request.
If a property is involved normally this transaction would be carried out in writing.
If one brother is holding legal title as bare nominee on behalf of the other children then there should be documentation to prove this. If this is the case I would say that all 4 jointly own the property.
If all you are doing is looking to transfer title from brother A to brother B (why would you do that?) then I would speak to a lawyer becasue there is no tax angle here. There is no disposal for tax purposes.
What is it they are trying to achieve and why?
No CGT implications
If B makes a similar declaration of trust then you have no change in the beneficial ownership, only in the legal ownership so there's no CGT.
There might have bneen CGT iomplications back in 2004 if the property had previously been A's since gift from mother in 2001 but that's not your question.
Like Blok - not clear why legal ownership needs to change but maybe the family has its reasons.
Don't be too surprised if A gets a query from HMRC - it's not unknown for them to see a change on the Land Register and assume there's been a disposal.