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Re: CGT Follows Beneficial Ownership?

Sale of Flat held in my name, where a trust was created holding 50% of property on trust for wife

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I wonder if I can ask for some clarification of something relating to CGT and beneficial ownership.

I have owned 4 investment properties in my own name for several years. In April 2017, I created a trust which confirmed that I held 50% of the 4 investment properties on trust for my wife, as follows:

“Date: 1st April 2017

I Fred Bloggs declare that I hold 50% of the properties described as:

X, Y, Z, A properties

on trust for my wife Freda Bloggs.

Signed:                                          Fred Bloggs”

She has completed Self Assessment Returns from 2016/17 to date, her income being 50% of the rent, along with some small amounts of dividends and bank interest. In both of our SA returns for 2017/18, we made HMRC aware of the trust, referencing our respective tax reference numbers.

On June 24th I completed the sale of Property Z, which was registered in my name only, and on which I had a mortgage in my name only. There is a gain of about £40,000 before any CGT allowance/s. As far as I am aware, CGT is based upon beneficial ownership so, given the above trust, we ought to be able to use both allowances, with 2 CGT declarations.

I was in the process of putting together the information for our declarations when, coincidentally, I opened up July's Property Tax Insider only to find the first article is on this topic and, to me, it seems to muddy the waters a bit.

“ HM Revenue and Customs (HMRC) considers there is no single factor determining beneficial ownership. For capital gains tax purposes, HMRC (in its Capital Gains manual, at CG70230) lists the following as indicators that a person is a beneficial owner of land:

holding legal title; occupying the land; receiving rental income from the land; providing the funds to purchase the land; or receipt of sale proceeds from disposal of the land.”

Apart from the fact that the above trust “confirms” my wife's beneficial ownership, there can be no doubt that my she received rental income from the property, and sale proceeds from the disposal of the property. She did not hold legal title, did not provide funds for the purchase, nor did either of us ever occupy the property. Having said that, I am now not clear whether:

(i) the trust on it's own confirms beneficial ownership, (it looks like it does)

(ii) whether all 5 of the conditions need to be satisfied, in addition to the trust, in order to confirm beneficial ownership, or

(iii) whether the two that she satisfies, along with the trust, confirm beneficial ownership.

I've read around CG70230 including the various links it sends you to, (CG22020?), and it actually looks like my wife is a beneficial owner of 50% of the property based solely upon existence/evidence of the trust of 1st April 2017, and we can make 2 CGT declarations, and claim 2 CGT Allowances.

I wonder if you could reassure me that my initial thoughts were correct, and that we should each make a declaration relating to 50% of the gain, (or otherwise).

Whilst I hope this is fairly straightforward, I have an accountancy firm who I engage as appropriate.

I hope the above makes sense, and am grateful for any help.

Many Thanks



Replies (4)

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By David Ex
04th Jul 2022 15:19

richard10002 wrote:

Whilst I hope this is fairly straightforward, I have an accountancy firm who I engage as appropriate.

Well you need professional advice so I’d say it’s appropriate to ask your accountants. What am I missing?

The site owner says “They are not here to provide free accounting advice.”

Thanks (4)
By Paul Crowley
04th Jul 2022 19:01

Judgement call
If you used the accountant when planning the trust, he is best placed to give an opinion that can be expected to be relied upon

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By More unearned luck
04th Jul 2022 20:22

Why you are asking non-lawyers for legal advice? You need a lawyer to construe your (purported) declaration of trust, not an accountant or tax adviser. IANAL but you may be snookered by it not being in the form of a deed. You know: signed, sealed and delivered; except nowadays a deed doesn't need sealing but your signature would have been witnessed.

For the declaration to have the effect you think it has (and might have for all I know- IANAL) then you must have at some point gifted of a 50% interest in each property to your wife, but there is no suggestion in your declaration that you had made or are making any such gift.

Who granted your tenants leases? You alone or both of you? How did your tenants know that they should pay 50% of the rent to your wife? Did they really pay you separately? (Money paid into a joint bank account is poor evidence for the claim that your wife received half the rents without more.)

How did you finance the mortgage payments if you received only half the rent?

How has relief for the mortgage interest been claimed? All by you or 50:50?

Who has insured the properties? You alone or both of you?

If I'm wrong about a deed being necessary or advisable, Justin will correct me.

Are you aware of your CGT reporting and tax payment obligations?

Thanks (4)
By More unearned luck
04th Jul 2022 20:23

My post was so good, Aweb posted it twice. What an accolade!

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