Wrong name on the deeds?

Q. My husband and I have just sold our buy-to-let property. We bought this many years ago in my name only, as it was easier for just me to get a mortgage at that time, although the deposit money came from our joint savings. We have just sold it achieving a substantial gain. I am a higher rate tax payer but my husband has only a small income and no other gains for this tax year. I have just realised that for Capital Gains Tax purposes, it would have been much better to have had the property registered in joint names – is there anything we can do?

A. Firstly, the legally shown owner of an asset is not necessarily the beneficial owner. It is beneficial ownership (not legal ownership) that counts when looking at calculating a Capital Gains Tax liability.

Secondly, to reduce the expected tax bill, you will need to be able to argue that the buy-to-let property was jointly beneficially owned, irrespective of what the Title Register or deeds may show.

The tax office generally assumes that if one spouse paid for an asset and is shown as the sole legal owner then, unless there is evidence to the contrary, they are also considered to be the beneficial owner.

However, HMRC have confirmed that they will take a number of factors into consideration when determining the true beneficial ownership of an asset such as this property.

These can include:

  • Who received the rental income and was it paid into a joint account and enjoyed by both of you?
  • Legal title, i.e. whose name is on the Title Documents or deeds?
  • Who provided the funds to purchase the property – can you demonstrate that the deposit came from a joint savings account?
  • Receipt of sale proceeds on disposal – What happened to these and were they paid into a joint account or divided equally between you?

None of these factors should be considered in isolation, and each case must be considered on its own merits. Obviously it will help to be able to support the facts.

HMRC may also look at other background information. So if you and your husband hold all other assets jointly, then this could also be a helpful factor in demonstrating joint ownership and, whether a reduced tax bill is appropriate.

Keeping good records and getting hold of clear evidence is extremely important, particularly in cases where beneficial ownership is unclear.

As with all things tax, it does make sense to take appropriate professional advice.