CGT on property and divorce

Client buys a house for the ex

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OK another saga.

Client gets divorced in 1996 and as part of the divorce proceedings buys a house for the ex wife. The property is registered in his name and the mortgage is in his name; the transaction was structured this way as the ex wife could not obtain a mortage due health reasons. At this point I am not sure if this was under a court order and I am unsure as to the transaction being completed prior to or post decree nisi; I am awaiting to hear back from his legal advisor on these points. The house was bought for £450K and is now worth circa £1M.

The ex wife has paid the mortgage every month to the client who has used the money to pay the mortgage. This has been declared on his self assessment as rental income. The client has never lived in the house.

The client now wishes to gift the house to his ex wife. As far as I am concerned the transaction would be subject to CGT and I cannot find any evidence to the disprove this. The client's legal team have said that they have heard of cases like this before where CGT is not payable as the client does not "really" own the house. They have not dealt with a case like this but have heard that the accountant only has to write to HMRC and the problem is solved. The client obviously rather fancies this approach.

The question is then can any one shed any light on the view of his legal team or point me in the right direction. I have asked a tax specialist, googled and read HMRC's CGT manual and unless I have missed something I am stumped. 

 

Replies (3)

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By chicken farmer
12th Jun 2018 10:50

You really need to spell out the exact terms of the Court Order (verbatim!) before anyone can give a sensible answer.

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By tonycourt
13th Jun 2018 16:08

If beneficial ownership of the property is with the ex-wife I agree with the solicitors - the financing arrangements are irrelevant. Therefore, as CF said, the terms of the court order are important as they will probably determine who beneficially owns the property.

BTW - at first blush it seems to me that the terms of the court order might bear on the income tax treatment of the payments received by your client (from his ex) in respect of the mortgage payments.

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By SteveHa
13th Jun 2018 16:18

They are suggesting a bare trust. See if there's any documentation to support that view.

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