Capital Gains Tax question

[Deleted User]

Morning all, I am hoping that someone with knowledge of CGT can answer a question that has been niggling in the back of my mind for a while.

Long story, short.

I have a joint mortgage with my sister (past 5 years), I do not live in the property but I am on the title deeds and pay half the mortgage (my sister got divorced, earned very little and had two school age children at the time, so I stepped in to help, I have always said that she does not owe me a penny, if she never has the money to pay me back then so be it, but if her circumstances change then it would be nice to be given any money I paid into the property back).

Now,6 years on and my sister is in a relationship and he is going to move in at the end of the year (he owns his own mortgaged property which he will rent out initially).

My question is, should they at some point decide to get married and/or sell both properties and buy together, am I liable for any CGT. Our flat has increased quite significantly in value over the past 5 years, but I wouldn't actually be "gaining" anything at the point of sale.

My best case scenario would be at the point of sale my sister would be in a position to pay back any money that I had paid into the mortgage/property, so basically a "loan".

I have a horrible feeling that you are going to tell me something different to my "assumption" but best to be in the know now!

Thanks for reading.

SmashedAvacado

you ideally should have documented that you were tenants in common in defined shares at the time of purchase - you 0.00000001% and her the balance. Do you know how you hold the property - as joint tenants or as tenants in common?

It appears that the intention was that you were never beneficially entitled to the proceeds, and that points to you and her being the legal owners and her being the beneficial owner and entitled to the whole proceeds and therefore you liable for no tax. You would need to be clear that this was your intention. do you have emails / correspondence confirming this arrangement?

[Deleted User]

We are Joint Tenants (no defined share split, so I guess 50/50??) with a joint borrower sole proprietor mortgage. We have various emails between us, solicitor and mortgage broker as we were an unusual situation.

SmashedAvacado

Jt's mean you each own the whole.

if you had a solicitor acting for you on the purchase, you should ask them why they set you up as joint tenants where the intention was for only one of you to be beneficially entitled to the property. You may have a claim against that law firm.

If it was not the intention that you would own the property, being JTs does not achieve that intention because you would have ended up owning the whole of the property had your sister died in the meantime for example.

You should speak to a solicitor about this - talk to them about wanting to sever your joint tenancy to provide that the property is held 99.999999% held by your sister. This can be done via a very simple declaration of trust. One page. But the key thing is to ensure they dont expose you to tax, so gifting your interest to her might be an option. They got you in this situation so its worth giving them a stab at getting you out of it.

[Deleted User]

Hmm, I think maybe because my sister had been very ill and had children under 18, the thought was that if something happened to her then I would own the property and could look after the kids etc. (and her ex-husband couldn't come sniffing round and move himself in!). Good to know that we can do a declaration of trust and amend this going forward, as I never intended to "profit" from this arrangement. thank you for your help and advice!

kingstreet

goochie wrote: »

We are Joint Tenants (no defined share split, so I guess 50/50??) with a joint borrower sole proprietor mortgage. We have various emails between us, solicitor and mortgage broker as we were an unusual situation.

JBSP means only one of you legally owns the property but both are named on the mortgage.

Effectively you are a guarantor only.

Pixie5740

goochie wrote: »

We are Joint Tenants (no defined share split, so I guess 50/50??) with a joint borrower sole proprietor mortgage. We have various emails between us, solicitor and mortgage broker as we were an unusual situation.

Joint tenants each own 100% of the property. However, you cannot simultaneously be joint tenants and have a joint-borrower-sole-proprietor mortgage.

goochie wrote: »

I have a joint mortgage with my sister (past 5 years), I do not live in the property but I am on the title deeds and pay half the mortgage (my sister got divorced, earned very little and had two school age children at the time, so I stepped in to help, I have always said that she does not owe me a penny, if she never has the money to pay me back then so be it, but if her circumstances change then it would be nice to be given any money I paid into the property back).

If you are named on the deeds then you can't have a joint-borrower-sole-proprietor mortgage.

You need to find out if you own the property as Tenants in Common or Joint Tenants.

00ec25

it is essential you confirm the legal ownership position first. If you are indeed joint borrower but sister is sole owner that the land registry records will show that


if on the other hand you are listed as joint owners, you need to find out if that is as joint tenants or tenants in common


if you are joint owners then tread carefully as a declaration of trust dated now "giving" your "share" to sister wil be a capital disposal between connected persons and will trigger CGT


the DoT would have to be retrospectively dated to the date of purchase, in which case the legal ownership had better have been sorted first before you go down the route of creating "old" paperwork to evidence the fact you do not have a beneficial ownership at all (or have a notional ownership % that keeps you below the CGT annual exempt allowance amount).


if you do then register zero/minimal beneficial ownership, you had better produce documentation that says all and any mortgage payments you have made since the start were in fact gifts to your sister. Those gifts will then form part of your own estate for your own inheritance tax position should you die. (the so called "7 year rule")

[Deleted User]

Thanks all, I have contacted our solicitor to clarify whether we are joint tenants or tenants in common.

[Deleted User]

Pixie5740 wrote: »

Joint tenants each own 100% of the property. However, you cannot simultaneously be joint tenants and have a joint-borrower-sole-proprietor mortgage.



If you are named on the deeds then you can't have a joint-borrower-sole-proprietor mortgage.

You need to find out if you own the property as Tenants in Common or Joint Tenants.

Thank you, you are correct we do not have a joint borrow sole proprietor mortgage, I read that on a email from 2013 but that is not the route we went, so pretty sure that we are Joint Tenants and have a joint mortgage. Waiting to hear back from my solicitor.