Two family members (brothers) purchased several properties privately as part of a joint venture (or partnership) with a view to improving the properties, fully furnishing them then letting them out fully furnished. There was an expectation of some capital appreciation over the longer term. Legal title remained solely in the name of the individuals but the 'understanding' between them was this is a joint venture/partnership and each would share in the profits (losses) and that they were equal owners of all the properties.
The properties were managed via a property management company (limited) set up and owned by the brothers as 50/50 shareholders purely to manage the rentals and clients. A further company (limited) was set up to invest in, improve, and rent out further properties. Capital was introduced into the companies by taking equity loans on the privately owned properties which had then gone up in value.
The properties bought by the brothers were originally bought using private bank loans at preferential rates compared to what could be obtained through a company or business.
Equity loans were then subsequently taken on some of the property purchased privately by the brothers. Some of this was introduced as capital introduced into the limited companies but also, since one brother 1 had originally paid the deposits and wanted 50% of the deposit money the brother 2 financed that using an equity loan on one of the properties which was in brother 2's name by way of buy in into the joint venture/partnership.
A property originally purchased by brother 2 for 100,000 subsequently then sold for 150,000 resulting in a small paper profit but there was no residual cash since there were equity loans which were paid back. Mortgage interest costs were incurred in paying back the original mortgage and also the equity loan by brother 2. Other costs incurred included all furniture, fitting a kitchen, lighting etc which were generally shared between the brothers. Since there was an equity loan taken on this property by brother 2 which combined with mortgage exceeded the sold price, brother 2 paid the bank the difference between the selling price and the loan amount to settle the loans (the property had since gone into negative equity so that the combined bank loans now exceeded the current value).
Should partnership or individual accounts be drawn up for this showing each partners capital contributions and drawings?
How should brother 2 account to brother 1 for this sale as the property was owned only in the name of brother 2 and not in the name of any registered partnership?
What are the CGT implications of the sale of any property, where title is in one person's name but unofficially it was agreed between them it was a joint venture/partnership?
What are the income tax implications with such an arrangement as above?
How should the loan interest costs be apportioned, should that be charged at commercial rates or at actual cost?
Any advice or help is greatly appreciated.