I now act for Mr and Mrs A.
Mrs A and Mrs B (sisters) formerly carried on business in partnership (a fashion shop and letting of three adjoining properties). In 2006 it was agreed verbally that Mrs A and Mrs B would go their separate ways and that the partnership property would be allocated two properties to Mrs A and two to Mrs B on the basis that each pair of properties were of equal value. Solicitors were instructed accordingly. Mrs A also instructed the solicitor to put one of her properties into her husband's name and the other was to be held jointly between them. The rents for the properties that were to be in my clients' names were received by them and my predecessor prepared tax returns for Mr and Mrs A reflecting these interests.
In 2013 I started to act and was told that there was a dispute between Mrs A and Mrs B over some other personal matter and the solicitors had been unable to deal with the legal side of the property transfer due to the non-cooperation of Mrs B. Mrs A and Mrs B then resumed discussions but Mrs B said she no longer agreed to the equal values and a valuer was instructed. This resulted in different values but in Mrs A's favour and at long last, matters have now been resolved with Mrs A receiving £5,000 from Mrs B.
The solicitor has stated that the properties are effectively being transferred now into Mrs A's sole name and he will then deal with the transfer of one property to Mr A and the other into joint names as originally required.
I was given to understand by the previous accountant that at the time of the original dissolution of the partnership no capital gains tax computations were prepared on the basis that there was an exchange of interests. However, as there was no legal contract at the original date, will this treatment still be appropriate or will the transfers taking place now have to be the subject of CGT comps in 2014-15? If the former, do readers consider that some form of deed of trust should be drawn up or affidavits sworn to confirm the beneficial interests? Any other comments about the CGT position on the exchange would be welcome.