capital gains nightmare-any way out??!!

jimmo

“My FIL is an accountant and says he has done the calculations properly, to be honest we are not going to take his word for it.”

Danger! Danger! Danger!

Is this you speaking or you and your husband? You could be in for one Hell of a family dispute which could cost a lot more than money. Accountants come in all sorts of guises including “Turf” (I’m old enough to remember Penny and Vince in Just Good Friends when it was originally shown. If you’re not, please excuse my personal indulgence).

If your FIL is a properly qualified accountant you are attacking his professional integrity in doubting his word. Can you justify that and maintain a reasonable family relationship?

From what you have said so far, especially that you and your husband effectively paid the mortgage then, in my former role as an Inspector of Taxes, I would have been inclined to accept an argument that you and your husband were the beneficial owners of the property from the day you moved in. That would be subject to your providing satisfactory evidence to justify what you have said.

That’s no guaranty that your MIL’s Tax Office will accept so readily. Inspectors of Taxes still have a lot of discretion on what to accept and what to challenge and justify their choices by results.

The problem is that if there is a Capital Gains Tax liability when your MIL transfers the property to you and your husband it will be her liability, not yours. She will be responsible for declaring the gain and paying tax on it and she will be the one who has to deal with any formal enquiry from HMRC (IR), not you.

You can seek all the professional advice you want but if your FIL believes that your MIL will be liable to Capital Gains Tax on the disposal he is more likely to influence what she declares than you are.

If he makes it a condition of the sale of the property to you that you pay your MIL the Capital Gains Tax that he believes will be due that is his choice, and your choice is to go along with him or look to buy elsewhere.

Whether you like it or not your MIL did you a huge favour buying your home when you could not possibly have bought independently. Its also significant that she did this herself rather than a joint venture with your FIL. As an accountant he will have appreciated the potential tax benefits of a joint purchase but may also have been wary that his direct involvement in a dubious scheme could damage his professional integrity.

If your FIL is a professional accountant he has probably, ethically got it right. You will still get a bargain compared to starting again but TALK TO HIM. You cannot talk to HMRC ( IR) about a tax liability which is your MIL’s not yours.

jimmo

EdInvestor

browrich wrote:

My mother in law offered to purchase our house seven years ago as my husband could not get a mortgage. The deposit put down on our house was his money (given to him as a gift)...

What was the reason husband couldn't get a mortgage in the first place (since obviously he had the deposit and could afford the repayments?)

Could the parents not have just guaranteed their son's mortgage?

While I appreciate the importance of avoiding family rows, the fact that the FIL is a professional accountant who presumably is well informed about things like capiutal gains tax does make the whole story look a bit odd.

Was any advice taken at the time?