CGT & CAT Investment Property

In the process of selling a house I bought 20 years ago. At the time I was not earning enough to get a mortgage so my father was put on the deeds and mortgage. 5 years later I moved and transferred the mortgage to a different provider and removed my fathers name. He still remained on the deeds. House was rented then and has gone sale agreed. My solicitor says the proceeds should be split but my father doesn’t want anything as he was purely on the deeds so I could get a mortgage. Every payment & tax return was in my name. If he gives my his half it will be seen as a gift. My accountant said I should backdate a deed of trust. Anyone done this? Does deed of trust need to be signed off by a solicitor?

I wouldn't even consider a deed of trust without robust legal advice.

If your father never made any financial contribution towards the cost of the property, and never received any of the rental income (which presumably has been fully returned as your own), then ascribing a portion of the sale proceeds to him wouldn't really make any sense. Everything is consistent with him being on the deeds as a legal owner only, for obvious reasons, so I wouldn't be giving this too much thought. As long as you and he are singing from the same hymn sheet, and there's demonstrably no money trail contradicting that, then there's nothing to see here.

Revenue's main interest would be to see that the appropriate CGT has been paid - you'll be taking care of that.

Their potential other concern would be whether there was an element of gift from your father to you - you can presumably demonstrate that this wasn't the case.

Yes everything paid by me and we are both singing from the same hymn sheet. Problem is how does he give me a sizeable chunk of money without raising queries with bank and revenue. Solicitor saying it has to be split.

I don't understand why the solicitor is saying that, do they not understand the situation.

Skunkard said:

Problem is how does he give me a sizeable chunk of money

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Why is he giving you a chunk of money? Because his name is on the deeds?

You might need to switch solicitor.

Or let him give the proceeds to your father and he gives them back to you.

She definitely understands the situation and knows he was only on the deeds for purpose of me getting a mortgage. Too late to change as closing in next few weeks. I suppose applying logic to the situation it is up to me to declare CAT. I will of course be paying CGT on the profit. At the end of the day it’s easy to prove every payment and tax return came through a bank account in my name only.

I wouldn't have much confidence in a solicitor who doesn't understand the distinction between legal ownership and beneficial ownership, but maybe there's some information / context we're missing. If they insist on paying to your father, so be it, you'll just have to do an onward transfer between yourselves.

The solicitor is just being ultra cautious, for their own benefit I suspect.

The legal ownership is clear, your father is part owner, it's on the deeds. The beneficial ownership, well if Revenue were to query it, you would be explaining, and if you are explaining you are losing.

I think this ultra cautious attitude of the solicitor is typical of many professional advisors, I had a recent similar experience with an accountant.

It sounds to me like they're out of their depth.

cremeegg said:

if Revenue were to query it, you would be explaining, and if you are explaining you are losing.

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I know it's just a figure of speech but it doesn't really hold true with Revenue - the nature of the tax system is self-assessment as there's an inherent information asymmetry (because we don't actually live in the GDR)... thus a large proportion of Revenue's initial compliance efforts are to ask for an explanation of something that the taxpayer knows the full detail of and Revenue don't. It's only after the explanation is received and considered that a decision around risk tends to happen.

So, in this context, you're only losing if you're explaining incoherently or contradictory to common sense or other credible indicators.

I’d say legally she has to explain that it may be viewed as a gift or early inheritance. My accountant suggested the deed of trust in case revenue ever queried it. Unsure how they would find out though as cgt will be paid on proceeds of a house sale. Maybe I’m being naive but my dad never benefitted in any way from putting his name on the deeds nor did he make a single payment.

Hopefully you've got financial records which will show that you paid the deposit, you paid all the mortgage payments, you received all the rent, you declared all the rent as your own income and paid income tax on it, and your father never paid a penny towards the house or received a penny from it.

That should be enough to satisfy the revenue that your father was a bare trustee only of his share in the house; he never had a beneficial interest.

Ideally you would also have an acknowledgement from your father, dating from the time the house was purchased, that he is going on the title purely to facilitate you getting a mortgage; and that he does not intend to contribute towards the purchase of the house or to acquire any beneficial interest in it. Obviously, you don't have that but in the crazy pre-financial crash days people were slapdash about such things, and the revenue understand that. If you have everything else the Revenue ought to be satisfied.

I don't understand your solicitor's advice. On the facts as you give them this looks like a fairly clear case to me. Possibly there are some additional facts not appearing in the OP that would explain the solicitor's position but, if not, I'd be looking for a second opinion.

Do not backdate a deed of trust. That's forgery. If that's what your accountant is really suggesting, find another accountant. But there's no objection to executing a deed of trust, dated as of now, which sets out the facts about the purchase of the house and who paid for it, and in which your father declares that he has only ever held a nominal interest in the property on your behalf and has never had a beneficial interest.

Thanks T McGibney. Yes I have all of that proof. Every mortgage payment and tax return was via bank account in my name. I believe I have set out all the information that is relevant. It is odd the solicitor at the time did not tell us to sign such a document but as you say pre crash times. So I should tell solicitor to make out proceeds to me only by the sounds of it. No CAT as not a gift just profit from 25 years of owning another house!