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Removal of named person from property deeds

Possible implications of removing named person from property deeds

A client bought his PPR a few years ago but in order to get a mortgage, he obtained a joint mortgage with his brother who was also included on the property deed. His brother never lived in the property nor did he contribute anything towards the purchase price, never paid anything for the mortgage repayments or for the costs of owning and living in the property. Now the client wishes to remove his brother from the mortgage and the property deeds. His brother also wants this and the mortgage company are OK for this to happen. There will be no money paid by the client to his brother. However, would there be any capital gains or sdlt implications?

Thanks in advance for any help.

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11th Jan 2019 15:45

I presume that would depend on the numbers but, potentially, yes.

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11th Jan 2019 16:22

It would appear he has been a mere nominee for his brother re both the property & the mortgage, so there should be no CGT/SDLT issues.

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to Justin Bryant
11th Jan 2019 16:34

Justin Bryant wrote:

It would appear he has been a mere nominee for his brother re both the property & the mortgage, so there should be no CGT/SDLT issues.

Bet that wasn't what the mortgage lender or the solicitor acting in the purchase were told, but you never know.

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to Accountant A
11th Jan 2019 16:57

So what if they didn't? All that matters for tax purposes is what they agreed between themselves (even tax tribunal judges accept that taxpayers may play a bit of a game with lenders to get lower rates and better terms than they otherwise would).

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to Justin Bryant
11th Jan 2019 17:07

Justin Bryant wrote:

So what if they didn't? All that matters for tax purposes is what they agreed between themselves (even tax tribunal judges accept that taxpayers may play a bit of a game with lenders to get lower rates and better terms than they otherwise would).

I'll bow to your superior knowledge on this. I'm surprised that tax tribunal judges would be indifferent to mortgage fraud. I suspect that's not how a mortgage lender would see it.

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to Accountant A
11th Jan 2019 17:18

Who said this was fraudulent? See:

Terrace Hill (Berkeley) Ltd v HMRC [2015] UKFTT 0075 (TC)

http://www.bailii.org/uk/cases/UKFTT/TC/2015/TC04282.html

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to Justin Bryant
11th Jan 2019 17:17

Justin Bryant wrote:

Who said this was fraudulent? See:

Terrace Hill (Berkeley) Ltd v HMRC [2015] UKFTT 0075 (TC)

If the borrower has misrepresented the capacity in which he has applied for a joint mortgage, then I would have thought that would be, in the broadest sense, fraud. I don't know because it's not something I've been directly involved with and obviously it doesn't matter to me. It might matter to the OP in terms of his MLR responsibilities.

https://www.marymonson.co.uk/fraud-solicitors/mortgage-fraud-solicitors/

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to Accountant A
11th Jan 2019 17:20

The mortgage is a red herring anyway, as all that matters is that he's a nominee re the property.

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11th Jan 2019 17:28

Thanks very much for your opinions. I don't actually know what happened about getting the mortgage, I wasn't involved but the brother in particular, was concerned about whether there would be any CGT implications.

@Accountant A. Why do you think that?

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to brian-scholar
11th Jan 2019 17:44

brian-scholar wrote:

Thanks very much for your opinions. I don't actually know what happened about getting the mortgage, I wasn't involved but the brother in particular, was concerned about whether there would be any CGT implications.

@Accountant A. Why do you think that?

Unlike Justin Bryant, I'm not an expert in implied trusts and nominees. He suggests that your client's brother did not acquire the property and mortgage for himself but as nominee for your client. My concern is that is almost certainly not what the mortgage provider was told when the application was made. From your question, I understood that the mortgage was only available because the brother was co-owner and mortgagee. If he now says something different, that suggests incorrect representations were made to obtain the loan which might be mortgage fraud.

All partly informed supposition but I'd be doing some research before assuming the nominee route is trouble-free.

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to Accountant A
11th Jan 2019 18:46

It could be mortgage fraud but, as has been mentioned, that is irrelevant for CGT purposes. If the client has been the beneficial owner throughout then a transfer into his sole legal name has no CGT effect. And, being realistic, if the mortgage company are now happy to transfer the mortgage to the client's sole name, I doubt they would take any action anyway. Though they may have known about the arrangement. The legal ownership tends to be a requirement of the joint mortgage.

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to cathygrimmer
12th Jan 2019 01:54

That is a very interesting view. I have a similar but slightly different situation. I will try to be brief.
18 years ago ago mother had a right to buy her council house on the cheap. But she had no money. So son (living elsewhere) provided all the money (£12,000) and they bought the house jointly for cash, and mother carried on living in the house on her own enjoying a beneficial interest in the whole property.
Mother developed dementia and about ten years ago had to move out into a home. Shortly afterwards, mother's half share was "gifted" to son, and within a year or so he started renting out the property himself.
I had assumed that the "gift/transfer" of the mother's half share then was a market value disposal by mother at MV £75,000 x 1/2 share = £37,500 (covered by PPR). Now that son has just sold the house for £85,000, it would be far more preferable if, on the occasion mother's half share was transferred to her son about ten years ago, the transfer was treated as a market value disposal of the whole house (£75,000) to the son in order for him to have a much higher CGT base cost.
Do you believe this view would be acceptable to HMRC, because it was only ten years ago when the son became entitled to a beneficial interest in the whole property.

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to penelope pitstop
12th Jan 2019 12:32

If the son provided all the funds, it sounds more likely that he was the 100% beneficial owner and his mother was only on the deeds because she was the one with the right to buy - especially if her share was transferred to him after she had lost capacity to gift it. So I think I'd let sleeping dogs lie!

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to cathygrimmer
12th Jan 2019 16:09

Thanks for that helpful input. I will do some more research. It is rather interesting.

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to penelope pitstop
13th Jan 2019 09:00

penelope pitstop wrote:

Thanks for that helpful input. I will do some more research. It is rather interesting.

It's a thread in its own right. Do your research and start the thread.

(Have a think about who contributed what, who enjoyed what - both relevant questions for the OP in this thread too, and AccountantA, it deems to me - and, if relevant, Include reversions to settlors in your research.)

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to cathygrimmer
12th Jan 2019 12:26

cathygrimmer wrote:

It could be mortgage fraud but, as has been mentioned, that is irrelevant for CGT purposes.

Slightly odd comment to make! If the OP suspects mortgage fraud then presumably he should be making a SAR and disengaging, not merrily carrying on completing the client's tax return!

Absent more details, we don't know exactly what has happened. The point I was trying to make was that, and I may be wrong, you can't have it both ways. The brother was either acting as nominee or on his own account. I don't believe (and, again, I may be wrong) that the mortgage lender and solicitor were told that the brother was acting as nominee.

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to Accountant A
12th Jan 2019 13:21

I don't know enough about the legalities of mortgages generally, or the specific circumstances under which the mortgage was obtained here, to advise on that aspect - but I do know a lot about CGT, hence I advised on that only!

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to Accountant A
12th Jan 2019 11:42

Accountant A wrote:

Unlike Justin Bryant, I'm not an expert in implied trusts and nominees. He suggests that your client's brother did not acquire the property and mortgage for himself but as nominee for your client. My concern is that is almost certainly not what the mortgage provider was told when the application was made. From your question, I understood that the mortgage was only available because the brother was co-owner and mortgagee. If he now says something different, that suggests incorrect representations were made to obtain the loan which might be mortgage fraud.

All partly informed supposition but I'd be doing some research before assuming the nominee route is trouble-free.

The mortgage taken out might well have been of the "Joint Borrower Sole Proprietor" type.

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to JohnShallcross
12th Jan 2019 12:20

JohnShallcross wrote:

The mortgage taken out might well have been of the "Joint Borrower Sole Proprietor" type.

Never heard of that one.

This (https://www.which.co.uk/news/2018/02/bank-of-mum-and-dad-could-this-mort... - Which?) says:

"A joint borrower sole proprietor mortgage allows a parent to help their child buy a home by joining their mortgage. But unlike a standard joint mortgage, the parent isn’t named on the title deeds."

The OP said the client's brother was on the deeds of the house.

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to Accountant A
12th Jan 2019 16:46

Some of these mortgages would have the parents on the title as well as on the mortgage. The parents are fully liable on the mortgage, but a declaration of trust can make it clear that the parents have no beneficial interest in the property. This article https://www.taxadvisermagazine.com/article/additional-properties emphasizes that the SDLT treatment depends on the underlying ownership, not the person in whom the legal title happens to be vested.

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to JohnShallcross
12th Jan 2019 18:50

JohnShallcross wrote:

Some of these mortgages would have the parents on the title as well as on the mortgage. The parents are fully liable on the mortgage, but a declaration of trust can make it clear that the parents have no beneficial interest in the property. This article https://www.taxadvisermagazine.com/article/additional-properties emphasizes that the SDLT treatment depends on the underlying ownership, not the person in whom the legal title happens to be vested.

Interesting article.

I think what can be achieved by planning, prior to acquisition, is partly the point. It was suggested that there were no tax implications of the proposed transactions if the OP's client's brother was acting as a nominee. I strongly suspect that the client did not take advice when purchasing his property (and so the brother was in all likelihood not acting as nominee) - and, indeed, how many jobbing accountants have the knowledge to advise as you do?

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14th Jan 2019 10:22

John Shallcross (of Zoopla fame I assume) is of course 100% right here.

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