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Ask Your Own Question, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 5141
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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My parents house was gifted to me in 1993. It was always understood

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My parents house was gifted to me in 1993. It was always understood that my mother would continue to live in the property for the rest of her life. Due to illness and infirmity she had to move out in 2013. The property was sold and the proceeds help to fund her care. Is PPR Relief for CGT available under a constructive or implied trust in this case?
Hello and welcome to the site. Thank you for your question.

Please clarify fo rme...
When the property was gifted to you back in 1993, was new ownership registered on the title deed?

It was mutually agreed and understood that she could live in the property thereafter rent free.

Many thanks
Customer: replied 2 years ago.

Yes, there was a Deed of Gift and the new ownership was registered on the title deed. I had paid the mortgage off which prompted my parents to gift the property to me so long as they could continue living there.

Thank you for your prompt reply.

Your parents would have availed PRR on transfer of ownership to the property when it was gifted to you back in 1993 as any gain on transfer then would have been covered by private residence relief being their main residence up to the time of transfer.

The property has been your second home for all the period it remained in your ownership (albeit your mother lived in it up to 2013) and as such would not qualify for private residence relief for CGT purposes, I'm afraid.

Valuation of the property at the time of transfer would form the basis of cost price for CGT purposes.

More information on private residence relief is covered in HS283 here

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

Customer: replied 2 years ago.

Thank you for your reply. However, why couldn't PRR be claimed under a common intention trust (TCGA92/S225)? It was always the common intention that my mother continued living in the property (which she did), she paid all the bills (and this can be evidenced) and the proceeds of the sale are being used for her benefit. I have been told that common intention trusts are often overlooked as a way of claiming PRR but can be acceptable to HMRC.

Thank you for your reply.You had stated in your earlier posting "I had paid the mortgage off which prompted my parents to gift the property to me so long as they could continue living there."At that point you became the legal and beneficial owner of the property. Your mother paid the bills but that did not make her the owner of the property or to claim benefical interest. Was there a written agreement/trust drawn or just a deed of gift?In my view provisions of TCGA92/S225 don't apply in your case.Having said that, if you feel that it may be acceptable to HMRC, then there is no harm in trying, I don't hold high hopes, I'm afraid.I hope this is helpful.
Customer: replied 2 years ago.

I'm sorry to drag this out but as far as I can see a constructive or common intention trust means that there was a clear understanding rather than a written agreement (which there was not). Based on what actually happened, this is just evidence that there was a licence to occupy the property in my view. If you don't think the provisions would apply in this case, in what circumstances would you think they would apply?

Thank you for your reply...

It is important to have evidence that legal and beneficial ownership differs.

As I see it, it became your property by deed of gift once you discharged the mortgage. There is no evidence that you as legal owner of the property made it clear to anyone that you owned the property subject to any agreement that your mother, being the occupier, has an interest in it.

In order to avail PRR under the provision of TCGA1992.s225, the onus of proof is on you to demonstrate there is a difference between the legal and beneficial ownership. I think your mum paying bills may not be sufficient. Had your mum not moved out, who would have benefitted from the sale of property?

You may find his article here helpful..

I hope this is helpful and other Tax Specialists are ready to help you