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Joshua
Joshua, Lawyer
Category: Law
Satisfied Customers: 26069
Experience:  LL.B (Hons), Higher Prof. Dip. Law & Practice
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My Brothers and Sisters helped our Mother buy her council house

Resolved Question:

My Brothers and Sisters helped our Mother buy her council house . In 1994 we all signed a "Declaration of Trust" and agreed to pay equal shares of her Mortgage.
Unfortunately, she died recently and the house sale is going through now.
The increase in value has led to us all having a share of the gain in value of £44K each, which is subject to Capital Gains Tax.
We are told that the first £11,100 is free of CGT, therefore the remaining £33K is taxable.
I earn around £23K per year and I reckon that I will have to therefore pay approx £7,300 in CGT. Some at 18% and some at 28%.
We are also told that before the sale goes through we could gift up to 50% to a spouse to minimise the amount of tax. I am not married but have been living with my partner for over 10 years. Can I gift a share to her or my Son or Daughter, or is there any other way of minimising the eventual bill? Please let me know what I can/cannot do. Thanks Alec
Submitted: 2 years ago.
Category: Law
Expert:  Joshua replied 2 years ago.
Hello and thank you for your question. I will be very pleased to assist you. I'm a practising lawyer in England with over 10 years experience. May I ask if under the terms of the declaration of trust you refer to your mother had a right to live in the property for her life please as a life interest? In other words the property could not be sold without her consent during her life by ay of you?
Customer: replied 2 years ago.

Hello Joshua,

Sorry for the delay in replying. I haven't used this Just Answer system before and was waiting for a message to come through on my personal email address.

In answer to your question--we assumed that Mother still owned the property and would live there as long as she wished to.

I have attached a copy of the Declaration of Trust for you to assess yourself.

Attachment: 2015-04-22_143749_scan3239_000.pdf

Hope you receive it ok.

Best Regards

Alec

Expert:  Joshua replied 2 years ago.
Thank you. That is very helpful. It is a pity the solicitors decided to draft the trust in the way they did rather than providing for a life interest trust because had they done so you could potentially all have avoided capital gains tax altogether. However they decided to prepare a bare trust instead which unfortunately means exactly as you understand that each of you are liable to CGT though I note it is not signed though it makes little difference in practice most likely. The position is that each of you will be able to apply an £11,100 allowance as things stand. Those of you who are married can also transfer half of a given share to a spouse to take advantage of the spouses allowance too thereby potentially doubling the allowance available. Unfortunately it is not possible for you to transfer your share to any other party than a spouse in order to achieve this because in doing so it is treated as a sale (irrespective of whether it is a gift or not). Only transfers to spouse are exempted. Barring any immediate plans to marry, unfortunately this means you are effectively discriminated against. The only option available to you is if you can delay the sale until after 5th April 2016. If you can do this then you can transfer an amount of your share not exceeding your CGT allowance to a third party - e.g. your partner or child. Providing the amount you transfer does not exceed the gain available under your CGT allowance then you will pay no CGT on the transfer. Then come April 5th next year you will get a new annual allowance and can sell the property based on your new lower share which will either reduce the amount of CGT you have to pay or eliminate it depending on the amounts involved. Your accountant can help you with working out the actual figures and the amount you can safely transfer. Another unfortunate issue is that had we had this discussion a few weeks ago you could have done this in the last tax year (up to April 5th) but unfortunately it is too late now as we are firmly into the current tax year. Nevertheless if you can delay the sale for a period, perhaps renting out the property, the above option is open to you. I hope the above is of assistance? If you have no further questions for now I should be very grateful if you would kindly take a moment to click to rate my service to you today or just reply back to let me know if the above is helpful. Your feedback is important to me. If there is anything else I can help with please reply back to me.
Customer: replied 2 years ago.

Hi Joshua,

Thanks for your feedback.

I don't expect that my Brothers and Sisters would agree to delaying the sale as it is going ahead now and I think they are looking forward to their share--understandably. Getting married strangely is an option for me.

If I were to get married in the next few weeks, is it simply a matter of once I have a Marriage Certificate I can transfer half the next day, presumably by filling out a specific form? It is only worth considering if the process of transfer is simple and can be carried out speedily.

Expert:  Joshua replied 2 years ago.
Congratulations in advance should you decide to do so. If you do then as soon as you are married (i.e. have the formal registration certificate) you can execute a simple deed of gift in front of an adult independent witness (though as you say it is probably wise not to do so on your actual wedding day so as not to get into trouble with your partner(!) though you could. The only legal rule you need to be aware of is that HMRC can challenge transactions where they can reasonably show that they were designed purely to avoid tax. Therefore if you were to transfer your share a day or two before a sale it could be subject to challenge by HMRC. Better therefore to try to allow a reasonable period of a few weeksi if possible between any gift to your then spouse and the date of sale. The more time in between the two the more unlikely it may be challenged by HMRC. I hope the above is helpful? Can I help you with anything else or has the above answered your questions satisfactorily? If you could drop me a quick message to let me know.
Customer: replied 2 years ago.

Thanks Joshua you have been very helpful.

With this system can I choose to contact you again in the future over other matters, or is it purely at random who I get?

Expert:  Joshua replied 2 years ago.
Yes certainly. You can either ask for me in the first line of any question and/or contact me through the following link:http://www.justanswer.co.uk/law/expert-joshua/
Customer: replied 2 years ago.

OK Joshua,

Thanks for your help.

Best Regards

Alec

Expert:  Joshua replied 2 years ago.
A pleasure. Best wishes
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