CGT - title deeds query

DippityDooDah

Apologies for long intro, but I need to set the scene.

I bought a buy-to-let 3 years ago, along my OH, my brother and his wife. We split the work evenly and the rent is split 50/50 between each couple. At the time we put the title deeds in my name only as it was easier for me to deal with the lawyers, and saved hassle when it came to landlord registration etc.

We have a document which we did ourselves that lays out how much we each invested and how any profit would be split if the property was sold. This has been signed by all of us.

My question is regarding Capital Gains Tax if we sell it. I am assuming at the moment we would only get relief on £10,600 as it is in my name only, so should we be adding the others onto the title deeds as well so that if we sell there would be no CGT due? Or is it enough that we have an agreement between us. I am not trying to avoid tax as this is genuinly a joint venture.

Would appreciate any advice from folk.

thanks

DDD
x

John_Pierpoint

Presumably the 4 of you have been displaying your beneficial interest by reporting the income for tax purposes?

As up to and including 4 people are allowed to legally own land, it is not self evident why you chose to go down the "Bare Trustee" route.

You don't give any figures but if we assume a modest run of the mill property, if you now do the capital gains calculation and each of you report a 1/4 share on your annual tax return I doubt they will be any enquiry.

jimmo

John_Pierpoint wrote: »

if you now do the capital gains calculation and each of you report a 1/4 share on your annual tax return I doubt they will be any enquiry.

I think Sir Humphrey Appleby would commend John for his bravery for saying that.
I would think the opposite because if or when HMRC are informed of the sale of the property the information they receive will be in the name of the legal owner so the initial risk assessment will compare the OP’s declaration of the sale of ¼ share with other information suggesting that she sold the entire property.
In the vast majority of cases that I dealt with the most common occurrences of joint ownership was husband and wife and, even in my day, it was pretty simple to take a look at the spouse’s Return to check whether the full disposal had been declared between them.
In the OP’s case we have 4 joint owners and HMRC will have absolutely no idea who 2 of them are. A prime candidate for an Enquiry.
Assuming, as John mentioned, all 4 have been declaring their respective shares of the letting income I would suggest that each of you should declare your respective share of the capital gain and give the names, addresses and Tax references of the others in the “white spaces” of your Returns.
Whilst you are not obliged to give those details it would reduce the chances of your being selected for Enquiry.

John_Pierpoint

Ah so it was jimmo who gave me a hard time over the sale of "my mother's home" ! :rotfl:;)

Seriously though it was some wretched clerk who rejected my letter explaining exactly what was happening and insisted that I bend and twist the situation to make it fit the CGT return pages and spend ages working out how much CGT I would not be paying.

As I remember it, it was a sort of pinky colour and consisted of 4 pages.
The system seems to have been changed since then:
http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=jwrHAxRnsvo&formid=3190#supplementarypages

It has a nice big white space now, where I could explain what had happened.

jimmo

It wasn’t me. Honest!
If you had spoken to me you could well have been on the phone (0845 number) for 2 hours or more before being put through but you would know my full name, my office location and my direct line number. However, as far as I am aware, our phone conversation would not have been recorded. Also it would not have been the first time I had to tell a customer that they had been advised incorrectly by others in HMRC.
If I recall your tale correctly there was an issue with at least one valuation but the nature of the beast is that you had to put figures in certain boxes.
If you failed to do that your Return would be rejected as incomplete regardless of any explanation you may give. That is the “routine” side of things.
You could, as you have said in the past, have put in virtually any valuations because the answer was always going to be the same. “No tax due.” If you had done that your Return would have passed routine muster and been processed.
Only after that would the Return be reviewed for Enquiry and I like to think that not one of my colleagues on the capital gains team would challenge a valuation, no matter how bizarre it may look, if there was no tax at stake.

If you had spoken to me you could well have been on the phone (0845 number) for 2 hours or more before being put through but you would know my full name, my office location and my direct line number. However, as far as I am aware, our phone conversation would not have been recorded. Also it would not have been the first time I had to tell a customer that they had been advised incorrectly by others in HMRC.
If I recall your tale correctly there was an issue with at least one valuation but the nature of the beast is that you had to put figures in certain boxes.
If you failed to do that your Return would be rejected as incomplete regardless of any explanation you may give. That is the “routine” side of things.
You could, as you have said in the past, have put in virtually any valuations because the answer was always going to be the same. “No tax due.” If you had done that your Return would have passed routine muster and been processed.
Only after that would the Return be reviewed for Enquiry and I like to think that not one of my colleagues on the capital gains team would challenge a valuation, no matter how bizarre it may look, if there was no tax at stake.

zygurat789

jimmo wrote: »

It wasn’t me. Honest!
If you had spoken to me you could well have been on the phone (0845 number) for 2 hours or more before being put through but you would know my full name, my office location and my direct line number. However, as far as I am aware, our phone conversation would not have been recorded. Also it would not have been the first time I had to tell a customer that they had been advised incorrectly by others in HMRC.
If I recall your tale correctly there was an issue with at least one valuation but the nature of the beast is that you had to put figures in certain boxes.
If you failed to do that your Return would be rejected as incomplete regardless of any explanation you may give. That is the “routine” side of things.
You could, as you have said in the past, have put in virtually any valuations because the answer was always going to be the same. “No tax due.” If you had done that your Return would have passed routine muster and been processed.
Only after that would the Return be reviewed for Enquiry and I like to think that not one of my colleagues on the capital gains team would challenge a valuation, no matter how bizarre it may look, if there was no tax at stake.

If you had spoken to me you could well have been on the phone (0845 number) for 2 hours or more before being put through but you would know my full name, my office location and my direct line number. However, as far as I am aware, our phone conversation would not have been recorded. Also it would not have been the first time I had to tell a customer that they had been advised incorrectly by others in HMRC.
If I recall your tale correctly there was an issue with at least one valuation but the nature of the beast is that you had to put figures in certain boxes.
If you failed to do that your Return would be rejected as incomplete regardless of any explanation you may give. That is the “routine” side of things.
You could, as you have said in the past, have put in virtually any valuations because the answer was always going to be the same. “No tax due.” If you had done that your Return would have passed routine muster and been processed.
Only after that would the Return be reviewed for Enquiry and I like to think that not one of my colleagues on the capital gains team would challenge a valuation, no matter how bizarre it may look, if there was no tax at stake.

Are you doubly sure?

DippityDooDah

thanks for your replies, I have been declaring the income on my own self assessment tax return only, and paying the tax due. I figured as long as HMRC were paid the necessary tax on the rental income it wouldn't matter who paid it.

I think we would be better changing the title deeds anyway, just to keep things right, although if we sold there would only be about £20k profit in it, so might just put my brother's name on the deeds rather than putting 4 names on the deeds.

thanks again

DDDx

xylophone

thanks for your replies, I have been declaring the income on my own self assessment tax return only, and paying the tax due. I figured as long as HMRC were paid the necessary tax on the rental income it wouldn't matter who paid it.

I think we would be better changing the title deeds anyway, just to keep things right, although if we sold there would only be about £20k profit in it, so might just put my brother's name on the deeds rather than putting 4 names on the deeds.

thanks again

DDDx

You seem to be indicating that although the property was in your name only, you were not in fact the beneficial owner of the entire property but were in effect a trustee/nominee for three quarters of it?

The whole income was therefore not beneficially yours? You should therefore have advised the beneficial co-owners formally and they should have made their own declaration of income? ( Their tax rate might not have been the same as yours/ put them into a higher band etc and on sale they each have their own CGT allowance?)

Alternatively, if you are claiming to be the beneficial as well as the legal owner, on sale you will be making a monetary gift to three people, two of whom are not your spouse so that there might be IHT implications for your estate?

In your position I would take professional advice from a tax accountant/solicitor before proceeding.