A client currently owns a buy-to-let property with his brother, and both brothers would like to transfer part of the beneficial ownership to their wives so that the beneficial ownership is 25% each.
I understand that legal ownership can only be in the form of "joint tenants" (LPA 1925, ss 1, 36), whilst beneficial ownership can be in the form of "joint tenants" or "tenants in common". The current legal ownership must therefore be between the two brothers as joint tenants, however, the beneficial ownership is currently as "tenants in common".
If the brothers were to change the beneficial ownership to B1=25%/W1=25%/B2=25%/W2=25% with one declaration of trust, then it could be argued that each borther was gifting 12.5% of their current share of the ownership to each wife. If this was the case, then the no gain, no loss CGT rule would not apply to a portion of the transfer and the the brothers would be liable to CGT on the gift.
If anyone could point me to the guidance on how HMRC would treat such a disposal I would be really greatful.
To side step the problem, I have thought that maybe the beneficial ownership could be transferred to two stages. The first changing the beneficial ownership to B1=50%/W1=0%/B2=25%/W2=25%, and then a second change to B1=25%/W1=25%/B2=25%/W2=25%. This way it would seem clearer who had disposed of which element.
This isn't something I have dealt with before, and I would appreciate any guidance anyone can offer.