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Transfer of Property - Settlements Trap ?

Sold half share in BTL to relative at market value.

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Hi

I am hoping someone can clear this up for me so I can settle my affairs.  I had a joint BTL with a relative. Lease was (and still is ) joint names. I sold my half to my relative at market value. Paid the CGT.  A new mortgage was acquired and the property is in her name only.  I did not ask for any money for my half of the gain. I understand that would become aprt of my estate.

The rent is still being paid into the previous  joint account,  but I have never taken a single penny out of the account and she just leaves the money in the account as well, saving it to pay off the mortgage one day.

I am getting completely confused over the settlements rules s624 - and if I have fallen foul of them I would rather sort matters out now than later. I am getting stressed over the,  if there are "conditions" then the income is the settlors. The property was correctly sold, taxes paid, there is no condition that I have imposed or acted out that I have any benefit from the property or income . 

Thanks in advance.

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By Hugo Fair
05th Jul 2022 10:04

Confused? Me too?

"I sold my half to my relative at market value. Paid the CGT" ... but
"I did not ask for any money for my half of the gain" and "Lease was (and still is) joint names" and "The rent is still being paid into the previous joint account".

So what transaction actually took place when you 'sold' your half of the property?

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By Tax Dragon
05th Jul 2022 10:45

Vector wrote:

I am getting completely confused over the settlements rules s624 - and if I have fallen foul of them I would rather sort matters out now than later.

Yes - and good idea.

I recommend an appointment with a tax advisor.

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By Vector
05th Jul 2022 11:46

Hi

"Sold it " as in -

Inially Purchased together for £150k - 50/50 split
Market value - £180k. Gain £30k / 2 = £15k

I paid the CGT on the £15k but gifted the £15k due to me.

She got a mortgage for the outstanding amount amd the property was put solely in her name so she is the legal owner.

The rent was initially in a joint account and since, as it was the same tenant.

No funds have ever been taken out by me. The new mortgage leaves the joint account as does insurance etc.

Thanks

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By David Ex
05th Jul 2022 11:58

In 2015 you were transferring a share of a buy to let property to your wife. Is that the “relative”?

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By Vector
05th Jul 2022 12:09

Hi

Re Relative -

Sister-in Law

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By Vector
05th Jul 2022 12:10

2020

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By AB_85
05th Jul 2022 12:17

As others have said s624 may be in point and you need to speak to an advisor.

I should think it would assist your argument if you had taken immediate action to remedy the position as soon as you realised there was any ambiguity as regards beneficial right to income. It isn't that hard to close a bank account or amend a lease.

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By Vector
05th Jul 2022 12:34

Hi

I thought I did this correctly. I have no beneficial right to income - demonstrated by that I have not exercised any such action.
How else would you sell any sset to a connected party other than lock stock and barrel.

It is correct that leases and bank accounts could have been amended to "show" the sincerety of the transaction but I came across this s624 just by chance - but is that it as far as HMRC would be concerned ?

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Replying to Vector:
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By Tax Dragon
05th Jul 2022 12:56

Please take advice.

This forum is no substitute.

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Replying to Vector:
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By Hugo Fair
05th Jul 2022 12:57

As TD said a couple of hours ago, "I recommend an appointment with a tax advisor"

You can go round the houses (apologies for the unintended pun) on a public forum - but "I have no beneficial right to income - demonstrated by that I have not exercised any such action" really just shows that you need to follow TD's suggestion.

FWIW - I have bank accounts that I haven't touched for more than 10 years (and which occasionally I have to 'reclaim' from the bank who want to get rid of low transaction volume accounts) ... but that certainly doesn't demonstrate that I have no beneficial right to what's in those accounts.

EDIT: TD's latest response beat me to it - and is more succinct!

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Replying to Vector:
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By AB_85
05th Jul 2022 12:57

No it isn't "it," necessarily. The intention and understanding between you and your relative is relevant. But if the income is being paid into a joint account and you are a lessor, there is likely to be a presumption that you continue to have an interest in the income. You would need to rebut that presumption, which is possible. Contemporary evidence of your intentions when you made the settlement is preferable. Failing that, getting everything in order going forwards is a good place to start.

You do need to consult an advisor.

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