Deed of Trust and CGT

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    Deed of Trust and CGT

    Hello to everyone, I am a new user so apologies if this has been asked before but?

    The in laws had the right to but their council house in 1994 but said that they could not afford it, liked the way they could just call the council if anything wanted doing etc. I said to the father in law well just send off for the paperwork as you don't know that you cant afford it until you see what the figures are. Figures came through and he could afford it but did not want the repairs problem if anything went wrong so he asked me if I would take it on by paying the mortgage, legal costs, survey etc, doing anything he wanted doing on the house and he would pay £100 per month rent which was put towards the mortgage. We agreed to this as we were a close family and it would save them quite a bit of money which came in handy as they were both pensioners. The deed of trust stated that he was responsible for the upkeep of the inside and I was for the outside, he insured contents, I insured the buildings and upon the death of the last survivor the house would pass to the wife and I. There was also a clause that the rent/contribution to the mortgage would never change and any mortgage repayable amount over that was to be paid by the wife and I. At the time of inception the rent on the property was £240 pm and when he died this year, last survivor, the applicable rent would have been £636 pm so it did save them a lot of money over the years. Whilst I appreciate that the house is now ours and worth approximately £100k the reason we entered into this agreement was ultimately to save them money with the benefit in 20, 30, 40 years time that the house would become ours.

    The question I would like to ask is whether we are liable for CGT as the property was never bought as a buy to let or an investment but purely to help the wifes parents. Regards, Chris .

    #2
    The short answer is you and your wife could have a CGT liability depending on the size of the gain etc.

    Also, if you made a rental profit, Income Tax could have been due.

    Comment


      #3
      Who's name is on the Deeds and the Mortgage. They must have bought the house from the council as that was the right to but deal. Regards Peter

      Comment


        #4
        Hello Peter, Both in laws names were on the mortgage and deeds when the house was purchased in 1994. When the mother in law died I paid to have the deeds changed over into the father in laws name. When he died in March this year I instructed a lawyer to deal with the deed of trust and the house was transferred into the wife and my name in August of this year.

        Regards


        Chris

        Comment


          #5
          I think you do not have any liability to CGT until after you and wife have sold the property to another party.

          Comment


            #6
            Hi Peter, have you any thoughts on my reply?

            Regards

            Comment


              #7
              Untill August this year you would have no CGT liability. Any increase in the value of the property in the future will give rise to a CGT liability against you and your husband. Regards Peter

              Comment


                #8
                Hello Peter, many thanks for your reply. So am I correct in saying that as the house was changed into our names in August this year and the house value on the Land Registry was marked at £90,000, if we decided to sell in the future at say £120,000 we would be liable for CGT on £30,000 minus our allowances?

                One last question if I may, are you a tax advisor and if so would you consider taking us on as a client?

                Warm regards.

                Comment


                  #9
                  What value was claimed for Probate. You may need a formal open market valuation via a RICS.
                  I am retired now. Regards Peter

                  Comment


                    #10
                    I assume the DoT transferred some/all of the beneficial interest to you and your wife in 1994 (?). If so, although your in-laws may have remained as the legal owners, you and your wife were the beneficial owners - it is the latter which is important for CGT purposes.

                    Comment


                      #11
                      Thank you for your reply. Yes we were classed as the nominees whilst they were classed as the purchasers or vice versa? I think we will be liable for CGT if and when but we are thinking about selling our main residence and renting so will nominate the rented house as our new main, if we can?

                      Comment


                        #12
                        You can not nominate a rented out property as your main residence.
                        I had overlooked the DofT, as King-Maker points out you may be the beneficial owner of the property and liable to CGT os disposal it all depends on what that DofT says. You should seek legal advice on that ideally with the solicitor that wrote it for you. Regards Peter

                        Comment


                          #13
                          Originally posted by OO06MMP View Post
                          Thank you for your reply. Yes we were classed as the nominees whilst they were classed as the purchasers or vice versa? I think we will be liable for CGT if and when but we are thinking about selling our main residence and renting so will nominate the rented house as our new main, if we can?
                          There will be no CGT liability until disposal.

                          Comment

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