CGT Implications on a House with a Declaration of Trust in Place

booksurr

in simple terms:

1. when the property was transferred from Mr and Mrs T over to A&E it was the main residence of T and so T was exempt from CGT liability. crucially however the transfer to A&E is to at least one connected person.
   
   
2. the transfer counts as a potentially exempt transfer against Mr T's inheritance tax since he is now the sole survivor. However, as we are talking about ex council tenants one assumes Mr T's estate will be rather small so unlikely to exceed the IHT threshold?
   
   
3. as connected persons A&E acquired the property at its then full market value. They are now liable for CGT on the gain between that value and whatever they now sell it for. There is no way to avoid this as you are selling a residential property not a business asset so there is no rollover relief if you then buy another property.
   
   
4. A&E are therefore liable to CGT - the declaration of trust has no impact since A&E are now the legal owners. Mr & Mrs T bought the property under RTB in 1990 using funds you gave them. therefore A&E were not its owners (of course not as the idea was to get the RTB discount) so cannot possibly claim dependent relatives relief since A&E purchased nothing. Leaving aside the fact DRR was abolished in 1988 anyway.
   
   
5. if Mr T and A&E now combine funds to purchase a new place together they will need to take professional (ie paid for) advice regarding the potential exposure to Pre Owned Asset tax (POAT) since Mr T will be providing funds for a property which he lives in but does not own making Mr T liable for income tax on the benefit in kind represented by his living for free in a property partly paid for by his own money (the value of the property gifted over to A&E) which has now passed down a generation to A&E. As the live in owners of the property A&E will be exempt from CGt when they sell it since it will be their main home
   
   
6. if A&E purchase a separate property for Mr T they will again be exposed to CGT on it as their exempt property would be the separate one they are living in leaving them with 2 properties of which one is liable to CGT. The fact Mr T is a relative is irrelevant.

Guest101

AET9 wrote: »

So the fact that Mr T has resided in the property for 25 years rent free and continues to and maintaining said property to a good standard is taking advantage of the system. I dare say if all that were added up it would come to more than the discount given at the time and some. - If Mr T had bought the property fairly, he wouldnt be paying any rent? Maintaining the property to a good standard is nothing to do with depriving social housing of a property which could be used by someone in need. Not sure how you can even try to count out the discount

Very cynical posters who obviously don't have anything better to do with their time judging by how many posts they have to their names. If you can't be helpful it's best to say nothing especially when not knowing all the facts.

I am being helpful, just not to you. Its a public forum and i suspect many dont lie the system being abused.

I genuiney hope the council claims back the discount, just plain wrong.