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Tale Of Woe

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From link below:

http://www.advfn.com/cmn/fbb/thread.php3?id=1012749&from=4976

CGT Dilemma

Can anyone please help with any information or advice to ease the worrying plight in which I now unfortunately find myself.

Between 8 and 10 years ago myself and my partner jointly bought 3 buy-to-let flats. With the 1st flat purchase I provided the entire 20% deposit from my savings and for the 2nd and 3rd flats I paid half and my partner paid half using partial proceeds from the sale of her house.

Our proposed arrangement was fully discussed with our Solicitor who handled all three of the deposits for the flat purchases and it was acknowledged that my partner was to receive all of the income from the flat rental and that she would solely benefit from it. This source of income has been declared every year by her when making her tax returns having offset any expenses such as mortgage interest, letting agents fees etc.

My sole financial interest was in taking half of any capital gains which arose when the properties were ultimately sold – not benefit from any of the flat income which would clearly have complicated my own tax situation.

Since my retirement in 1994 all of my pension and interest income has been taxed at source with no liability for higher rate tax. I have taken care to ensure that my capital gains have never exceeded the annual allowance which was then transferred into PEPs and ISAs. This year for the first time I had substantial losses which meant selling more than my CGT allowance to be able to offset them. On writing to my tax office listing shares that had gone into administration and which appeared to have neglible value I also mentioned the arrangement that had been in place for the last 8-10 years.

When I didn’t receive a reply I telephoned the tax office and discovered that my letter had been received and a detailed reply sent out which appears to have gone astray. The contents of the letter were discussed over the telephone and I was horrified to learn that the flat income has to be split 50/50 which means that I will now be liable for paying higher rate tax for an income that I have never received. Worse still it appears that I will now be liable for paying various penalties for underpaying tax and late returns which take account of an income that I have never received.

Can anyone who has had a similar experience please tell me how best to respond as a tax return form(s) are also apparently being sent separately but have yet to arrive.

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The solicitor who did your work should have pointed out that as owner the profits are yours unless you were gifting the money... in which case you'd not own anything...

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sounds like this was a partnership of husband and wife, and as such, the partners are jointly and severally liable for all the tax...so if one partner is a bit short on the partnership tax bill, then the other has to pay. Same for the CGT.

Should have done a LTD or LLP.

See a tax professional would be my advice.

Edited by Bloo Loo

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Our proposed arrangement was fully discussed with our Solicitor who handled all three of the deposits for the flat purchases and it was acknowledged that my partner was to receive all of the income from the flat rental and that she would solely benefit from it. This source of income has been declared every year by her when making her tax returns having offset any expenses such as mortgage interest, letting agents fees etc.

"However, where the joint owners are husband and wife, or civil partners, profits and losses are treated as arising to them in equal shares unless:

both entitlement to the income and the property are in unequal shares, and

both spouses, or civil partners, ask their respective tax offices for their share of profits and losses to match the share each holds in the property.

Follow This link to see the relevant page from HMRC tax manuals.

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If your partner has declared the income every year and paid any tax owing then surley you can not both be liable for the same profit and that profit be taxed twice .

I.E. if there was £20k profit and she paid tax on that why are they chasing you when she has declared that as hers. Would that not be proof that you never earn't the money as she did and paid tax on it.

Had a similar situation a few years back . Bought a flat with a friend that we restored , It was in joint names , my name being the first on the mortgage. We could not get on when restoring the property and nearly killed each other . We had also bought another flat off plan that was only in my name and were going to put the other flat in joint names when it was built and mortgaged.

We decided to go our seperate ways , she keeping the restored flat and I kept the other one. I would keep the other flat in my name and sign over the restored one to her, we agreed that the split was fair and the values in each were about the same. She could not put the restored flat in her name straight away as she was between jobs and the mortgage company would not let her take the mortgage over on her own , so it stayed in joint names.

I went and lived in the new flat as my main home and after a year sold it with no tax due as it had been my main home . She let the restored flat. I asked my accountant about declaring the tax due from rent and he said don't worrie she is getting the money and it is her who should pay the tax . She then sold the flat and I signed my name for it to be sold , the soicitor phoned me and asked for written agreement that the money from the sale all went to her, this I did.

When the tax was due from the sale she failed to declare and pay what was owing. Explaining this to my accountant he hit the roof saying that the tax man would chase me and/or her , that they would just want their money and did not care who paid it , he also said that my name being first on the mortgage could have an affect on me .

I said to the accountant that the previous year he had advised me that there was no problem and now he saw things as different. He was not going to agree this and had never put in writting what he had said the previous year ( lesson one don't trust anyone even accountants) and if they give advise get that advise in writing.

My accountant did write to the tax office explaining the situation and they were very understanding and helpfull , we got a letter back stating somthing like owning the asset but not gaining form it can make a person unliable for the tax due if they did not benefit from the profits.

In the end after letters to her accountant and her , plus her knowing that the tax office was aware that the flat had been sold she did declare and pay up no one ever came after me for any money.

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  • 144 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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