Removing name from title deed - any tax/CGT implication?

maxxpayne

Keep_pedalling said:

maxxpayne said:

you state partner currently resides in her own (ie father's) property. That is an important fact.

Sorry if I accidentally implied that - that is not the case. We have been living together in my property since we have been together since 2015.

It does beg the question why was partner included on the deeds in the first place if she willing to "give up" the property for zero money

The property is a BTL that my partner's father earns income from while he is alive.

Sounds as though father was trying to DIY his inheritance planning but it is now unravelling? So what will partner get as her inheritance in lieu of a share of the property?

100% this. I guess my partner has to trust her siblings to do the right thing in the worst case scenario.

If he is receiving the income then he has the beneficial interest in the property, which means it is still part of his estate for IHT purposes. Not such a cunning plan. 

Doh! My partner just informed me that the property was purchased in cash. It's not a BTL. My bad. 

So this means that at least removing my partner's name will be straightforward and no tax/CGT implications as long as she declares no profit.

maxxpayne

Bookworm105 said:

maxxpayne said:

The property is a BTL that my partner's father earns income from while he is alive.

so have siblings been receiving any share of the rental income or does it all go to father?

if all to father then father retains sole beneficial ownership of the property and if so he remains liable for all CGT if sold whilst he is still alive or when he dies it will form part of his estate for IHT purposes 

in this instance tax is based on beneficial ownership, not who is on the deeds, ie  has legal ownership 

Apologies - property is not BTL. It was outright purchased.

maxxpayne

Brie said:

Option 1 - congrats on your pending "nuptials!"   But that won't make any difference on whether your partner is considered to be in her main residence or not.  She lives there, that's her main residence.  Of course it will also simplify many other tax things way down the line so sounds like a good MSE type thing to do.

Option 2 - my first question would be why is your partner's name on the deed.  And just because she didn't buy the property herself doesn't necessarily mean she won't have tax implications.  If one inherits a property and then sells it 10 years later having never lived on it CGT is due.  I can't see that this is very different.  But there's better people than me to advise on this bit who will no doubt jump in shortly.

Thanks. Apologies I now note that I worded ownership with her siblings in a way that makes it look like my partner lives in the property with her siblings. That's not the case. It's just her name is on the deed with her siblings. She or her siblings don't live in the property and she has been living with me for the last 12 years.

Bookworm105

maxxpayne said:

Doh! My partner just informed me that the property was purchased in cash. It's not a BTL. My bad. 

So this means that at least removing my partner's name will be straightforward and no tax/CGT implications as long as she declares no profit.

can we start again please.... I do not like your wording: "declares no profit" as that is not technically correct re the tax free position.

Background
for the last 12 years your partner (not currently married to you) has lived with you in a property you own in your sole name 

Partner legally co-owns another property with her siblings because her father put them on the deeds of it. In reality that property is let, but her father receives all the rental income in his own name. Neither partner nor her siblings(?) have never received any money from the letting and therefore do not have a beneficial financial interest in that property, irrespective of them being its legal owner.
 
Partner does not legally own any other property, nor does she have a beneficial interest in any other property 

You and partner are already in the process of purchasing a new property in joint names. A completion date has been set.
You will be selling your current home and therefore, in SDLT terms, you will be replacing your main home and so would be subject to only standard rate SDLT were the purchase to be in your sole name only.
However, doing so as things stand at the moment would result in the purchase incurring additional rate SDLT because, as joint ownership, partner would be purchasing an additional property and, because she is not married to you, she cannot claim to be replacing her main home as she no legal or beneficial interest in your home (despite living in it).

Option 1
a) You are already in the process of selling your current property with a completion date already set.
b) You are already in the process of entering into a civil partnership 

If b) happens before the completion date a) then this thread is redundant as you will not face higher rate SDLT and all will be well. (Until the divorce when she takes you to the financial cleaners)

Option 2 
If the marriage timescale fails then the other option to avoid additional rate SDLT is for partner to cease to be owner of the sibling property before the new purchase completion date. 

To remove her legal ownership she needs to transfer her share to either her siblings or back to her father.

Provided no money whatsoever passes to her from either siblings or father then she has demonstrated zero beneficial financial interest in that property and so would not face any CGT implications from relinquishing her ownership share. It is not a case of "not making a profit". It is a case of getting absolutely zero money (or anything else of monetary value) in exchange for her share. 

The rental property was purchased for cash so there is no question of having to sort out who is, or is not, on a mortgage of it. (Were she party to a mortgage then her removal from that mortgage would be an exchange of beneficial interest with resulting CGT implications)

The legal ownership of the sibling property may either be as Joint Tenants or as Tenants in Common, we don't know yet.
Depending on which type, the process for removing her name from the deeds (relinquish legal ownership) is set out in the land registry guides and could be done DIY if you fancy it, or simply left to a conveyancer to process (under a strict deadline) on her behalf.
The key point is she cannot receive any money because if she does so she will evidence a beneficial interest. She would thus be liable to CGT for her entire ownership period, as she has never lived in it herself whilst on its deeds. 

CGT is based on beneficial ownership, not legal ownership. So perfectly possible to avoid tax on something that you have legally owned but give away for nothing in return.

(The repercussions of partner giving up what appears to have been intended as her part of her inheritance from father is outside the scope of the original question re SDLT and/or CGT) 

maxxpayne

Bookworm105 said:

maxxpayne said:

Doh! My partner just informed me that the property was purchased in cash. It's not a BTL. My bad. 

So this means that at least removing my partner's name will be straightforward and no tax/CGT implications as long as she declares no profit.

can we start again please.... I do not like your wording: "declares no profit" as that is not technically correct re the tax free position.

Background
for the last 12 years your partner (not currently married to you) has lived with you in a property you own in your sole name 

Partner legally co-owns another property with her siblings because her father put them on the deeds of it. In reality that property is let, but her father receives all the rental income in his own name. Neither partner nor her siblings(?) have never received any money from the letting and therefore do not have a beneficial financial interest in that property, irrespective of them being its legal owner.
 
Partner does not legally own any other property, nor does she have a beneficial interest in any other property 

You and partner are already in the process of purchasing a new property in joint names. A completion date has been set.
You will be selling your current home and therefore, in SDLT terms, you will be replacing your main home and so would be subject to only standard rate SDLT were the purchase to be in your sole name only.
However, doing so as things stand at the moment would result in the purchase incurring additional rate SDLT because, as joint ownership, partner would be purchasing an additional property and, because she is not married to you, she cannot claim to be replacing her main home as she no legal or beneficial interest in your home (despite living in it).

Option 1
a) You are already in the process of selling your current property with a completion date already set.
b) You are already in the process of entering into a civil partnership 

If b) happens before the completion date a) then this thread is redundant as you will not face higher rate SDLT and all will be well. (Until the divorce when she takes you to the financial cleaners)

Option 2 
If the marriage timescale fails then the other option to avoid additional rate SDLT is for partner to cease to be owner of the sibling property before the new purchase completion date. 

To remove her legal ownership she needs to transfer her share to either her siblings or back to her father.

Provided no money whatsoever passes to her from either siblings or father then she has demonstrated zero beneficial financial interest in that property and so would not face any CGT implications from relinquishing her ownership share. It is not a case of "not making a profit". It is a case of getting absolutely zero money (or anything else of monetary value) in exchange for her share. 

The rental property was purchased for cash so there is no question of having to sort out who is, or is not, on a mortgage of it. (Were she party to a mortgage then her removal from that mortgage would be an exchange of beneficial interest with resulting CGT implications)

The legal ownership of the sibling property may either be as Joint Tenants or as Tenants in Common, we don't know yet.
Depending on which type, the process for removing her name from the deeds (relinquish legal ownership) is set out in the land registry guides and could be done DIY if you fancy it, or simply left to a conveyancer to process (under a strict deadline) on her behalf.
The key point is she cannot receive any money because if she does so she will evidence a beneficial interest. She would thus be liable to CGT for her entire ownership period, as she has never lived in it herself whilst on its deeds. 

CGT is based on beneficial ownership, not legal ownership. So perfectly possible to avoid tax on something that you have legally owned but give away for nothing in return.

(The repercussions of partner giving up what appears to have been intended as her part of her inheritance from father is outside the scope of the original question re SDLT and/or CGT) 

Amazing! That’s some gold standard reply. Thank you sir/madam!