transfer title or deed of trust regarding CGT reduction

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  • neilm
    started a topic transfer title or deed of trust regarding CGT reduction

    transfer title or deed of trust regarding CGT reduction

    Hi All
    I am selling a BTL which is currently in my name only. In order to reduce the CGT would I need to transfer the title to include my wife or would a deed of trust suffice?

  • Kape65
    replied
    So is it possible to use a dot to transfer beneficial ownership to ones spouse who is not named on the legal title? I was under the impression that this couldn't be done. Would the mortgage company not block such a thing?

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  • jpkeates
    replied
    There are a number of different types of trust.

    One that owns property usually has to be formally recorded with HMRC as a separate entity and has to submit its own tax return annually.
    A simple trust to change the beneficial ownership is a different type of trust, which simply requires a one-off formal notification to HMRC.

    I don't know enough about trusts to pretend to know much more than that, but the rules and procedures are obviously different in different cases.

    I have to say that I was always of the belief that joint ownership was necessary for a change of beneficial ownership split, but that could be one of those self-perpetuating bits of "knowledge", which is only "true" until someone points out its wrong.
    Certainly it's how most people who have asked the question seem to have been told by their solicitors.

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  • AndrewDod
    replied
    Originally posted by Gordon999 View Post

    But it seems a single name in the property title + DOT is not enough to satisfy HMRC under " their rules ".

    HMRC want to see both spouses names registered on the property title before they accept a DOT to vary the distribution of rental profit. .
    There is no such law or rule in general (for example with a DoT giving beneficial ownership to my child).

    Indeed such a rule would make no sense since one can have only four trustees, but many more owners than that. The ruling relates to ownership (which the DoT is). What is the case is that if both spouses are names on the trust deed (as legal owners) and this is as joint tenants (not tenants in common) then there can be no variation in distribution because this is 100% shared ownership by definition and has to be declared as 50:50.

    Beneficial interest **is** ownership. Being on the title is not. A trustee is not an owner (necessarily).

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  • Little Rabbit
    replied
    Gordon999. Sorry, I am on my phone and struggling to copy and paste from your post above. But where is your source please to say that HMRC want to see both spouses' names on the title before they will accept a DoT which varies the distribution of rental income? I can't see anything which says this in the official HMRC guidance I have been reading (see link below):

    https://www.gov.uk/hmrc-internal-man...anual/tsem9520

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  • Gordon999
    replied
    Originally posted by AndrewDod View Post

    A Deed of Trust is perfectly sufficient. It confers beneficial ownership - the "joint names" only has to do with legal ownership which is irrelevant in and of itself to CGT. As above it cannot be retrospective, and in terms of transfer to a spouse, the baseline value is backdated and back-valued to the acquisition by the spouse. All you will achieve is an extra 11K allowance, which will save at most £3000 in tax. You can also transfer to joint names, which in the absence of a separate DOT would achieve a similar goal.

    There is no stipulation that it has to be a year before.
    A Deed of Trust may be sufficient for you and your solicitor.

    But it seems a single name in the property title + DOT is not enough to satisfy HMRC under " their rules ".

    HMRC want to see both spouses names registered on the property title before they accept a DOT to vary the distribution of rental profit. .

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  • AndrewDod
    replied
    Originally posted by jpucng62 View Post
    I am no expert - but I think that if HMRC believe you have transferred the property to avoid CGT they can charge the full amount anyway. HMRC always want their pound of flesh.
    Not correct. It is perfectly permissible (and routine) to transfer value precisely to reduce CGT.

    Leave a comment:


  • AndrewDod
    replied
    Originally posted by Gordon999 View Post
    You would need to transfer the property into joint name in the year before sale in order for your wife to claim the capital gains free allowance of £11,700 on her share of the property .
    A Deed of Trust is perfectly sufficient. It confers beneficial ownership - the "joint names" only has to do with legal ownership which is irrelevant in and of itself to CGT. As above it cannot be retrospective, and in terms of transfer to a spouse, the baseline value is backdated and back-valued to the acquisition by the spouse. All you will achieve is an extra 11K allowance, which will save at most £3000 in tax. You can also transfer to joint names, which in the absence of a separate DOT would achieve a similar goal.

    There is no stipulation that it has to be a year before.

    Leave a comment:


  • jpucng62
    replied
    I am no expert - but I think that if HMRC believe you have transferred the property to avoid CGT they can charge the full amount anyway. HMRC always want their pound of flesh.

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  • jpkeates
    replied
    Live and learn.

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  • Gordon999
    replied
    The transfer of property between spouse is subject to special conditions as stated in :

    https://www.gov.uk/capital-gains-tax/gifts

    The capital gain for the transferred property to spouse is calculated from the original date of first purchase.

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  • jpkeates
    replied
    Form 17 is how you advise HMRC of a change of beneficial ownership.
    If your intention is to transfer part ownership to your wife, it will be a joint ownership from the point of transfer and the beneficial ownership will also change from that point.

    It's half way through February and, even if the transfer of ownership was done very quickly, it would only allow you to transfer the liability for the tax on any gain in the next month or so.
    All of the gain to the point of transfer will be in your name as you owned the all of the property during that period.
    That's my point about retrospection - will there be any meaningfull gain in the next 7 or 8 weeks?
    Because a portion of that is all you can transfer to your wife.

    If you have a buyer and have started the sale process, they're going to be a bit hacked off if you change the ownership of the property title now.

    If the property has a mortgage, the transfer isn't a gift (so sdlt might be due) and the lender may not allow the change.

    If you do change the beneficial ownership, don't forget to formally notify any tenant in the property.

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  • neilm
    replied
    Hi Gordon999 and jpkeates,
    Gordon your suggestion is what I was hoping to do, do the paperwork in next couple of weeks and exchange sale contracts after 6th april. I thought form 17 only applies to joint ownership? jpkeates when you say retrospective, do you mean retrospective from day of purchase or retrospective in terms of not possible after the sale of the property?

    Leave a comment:


  • Gordon999
    replied
    Neilm.

    I was referring to tax year . So my suggestion is " do a% transfer to your wife this month and send the Form 17 asap to Tax Office to enter on their 2018-2019 records ".

    Then you would "exchange sale contracts " after 6th April 2019 and you and your wife will have to report the sale and claim the capital gain allowance in the tax return for 2019-2020 ( after 6 April 2020 ).

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  • jpkeates
    replied
    It doesn't really matter though, because it's not possible to make any change retrospective.
    Any change of ownership will only have an effect from the day it becomes effective (plus some time to notify HMRC) so the effect on the tax due would be negligible.

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