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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3821
Experience:  FCCA FCMA CGMA ACIS
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27 years ago my wife and I teamed up with her two sisters,

Customer Question

27 years ago my wife and I teamed up with her two sisters, brother and parents to buy a large property where we have since lived successfully and happily as an extended family. The property is our sole residence. It is registered in my brother-in-law’s and his wife’s name, although the five groups originally all made unequal contributions towards the purchase price. We are now selling the property and are near to exchanging contracts. The solicitors acting for my brother-in-law and his wife do not seem to think that there will be a problem with regard to the distribution of funds to the other parties but I wonder whether you could clarify that despite not having title to the property my wife and I and her two sisters will not be liable to capital gains tax once the funds have been distributed. Should an agreement of tenants in common be drawn up before exchange or is evidence of a divorce settlement of one of the parties where mention was made of joint ownership fifteen years ago be enough to prove to the tax authorities that the property has been our joint home since 1987? Many thanks for your help. Martin Baker, York N. Yorks.
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello Martin, I'm Keith and happy to help you with your question.
I concur with the opinion of your solicitor. There will be a liability to Capital Gains Tax on the gain made on sale, but as it was a sole of main domestic residence Private Residence Relief (PRR) would apply and this reduces the tax by 100%. The only danger is if those whose names are ***** ***** deeds decide pocket the money and walk away with the cash; then you have a slight problem!
I cannot see any difficulty in selling as it stands, particularly if the solicitor involved is instructed by the registered owners to split the net proceeds as agreed on receipt of moneys from the purchaser.
I do hope I have helped set your mind at rest on this matter.
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Customer: replied 2 years ago.

That's very reassuring. Thank you. So:



  1. no need to draw up a Tenants in Common agreement at any time before completion?

  2. will Inland revenue require evidence that this has been our sole residence for the last 27 years?

  3. on receipt of the funds would we need to contact Inland Revenue? or

  4. can we go ahead and use the money to make an offer on another property without fear that IR would make demands at some later stage?


Martin

Expert:  bigduckontax replied 2 years ago.
There will be no demand for moneys Martin. The sale is entitled to PRR which is given automatically.
The Inland Revenue was combined with HM Customs and Excise some years ago to form HMRC.
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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