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.