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Sam
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Category: Tax
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My ex-wife owned a second home that one of her relatives lived

Resolved Question:

My ex-wife owned a second home that one of her relatives lived in until his death. Prior to it going on the market she gave me 50% of the property via a declaration of trust. The property then sold and she retained all of the proceeds. Shortly after this we separated and divorced recently (it was agreed she would retain the proceeds of that sale as part of the divorce and she has since bought an investment property with it).

Capital gains tax will be payable on the property sale this year. Legally, would I have to pay 50% of the capital gains tax and is my ex-wife within her right to ask me for it?
Submitted: 3 years ago.
Category: Tax
Expert:  Sam replied 3 years ago.

Hi Thanks for your question

 

 

You are liable to HMRC for your share of the gain IF your name was still on the property when sold. (But it would be HMRC looking for this - not through your ex wife) and this is what you seem to suggest has happened - sold whilst still in joint names ? If so then yes, I am afraid you must declare your half share of the gain - and will be liable to tax on said half share.

 

 

 

However if the property had been transferred back to your ex wifes' sole name prior to sale, then the gain is entirely hers, as HMRC would only be looking at her to charge the gain on.

 

Thanks Sam

Customer: replied 3 years ago.

Hi Sam,


 


Thanks for your response.


 


My name was never on the register of title at the land registry. The 50/50 split was done only via a declaration of trust, which I assume HMRC would never know about unless I refused to pay and my ex-wife gave it to them?


 


I was hoping that as I never 'gained' from the sale I wouldn't be liable.


 


Thanks,


Neil

Expert:  Sam replied 3 years ago.
HI Neil

Thanks for your response

I am afraid you are liable to capital gains tax, even though you have not benefited from any of the gain, as you are deemed to be joint owner with your ex wife of this property, which was sold without the declaration of trust being changed back to her sole name.
This is because a simple declaration of trust stands as if the property title had been transferred in your name also.

Therefore you need to declare your half share of the capital gain to your own tax office, and subsequently will be liable to tax on any excess over the capital gains exemption allowance (currently £10,900)

But your ex wife has no legally right to ask you for your share - this matter is between you and HMRC, and might I suggest that you take legal advise prior to sale, as I would have thought she would have been required to transfer it back into her sole name as part of the settlement agreement - and whilst I am a tax expert - I am not a legal expert, so do check if there is any recourse (although from a tax point of view, for this transfer to have been treated as exempt - then the transfer would either had to have taken place in the year of separation - when you are still treated as married for tax purposes, or drawn up in a deed of separation also drawn up in the year of separation)

Thanks

Sam
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