Transfer of title deed between strangers. Calculating capital tax due

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Smoneen

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Persons A & B are 50/50 tenants in common on the title deed of a property. This property is the PPR of person A. A & B are strangers / category C for the purpose of the capital taxes.

Property has been paid for in full by person A, including deposit, mortgage and interest. The mortgage has been fully repaid. The property now needs to be transferred in full to person A.

Purchase price: €190,000
Amount repaid, including interest: €220,000
Current Value: €250,000

I’m trying to work out the chargeable gain for the CGT/CAT due however as person A has solely paid for the property is this taken into account? You can ignore stamp duty, that one is covered.

Thanks in advance for any guidance on this one.
 
I am no good at precise CGT calculations but I would think the following:

  1. Who paid the mortgage is irrelevant
  2. For person B there is a capital gain of €60k divided by two and reduced again by 4/20 as it was their PPR for four of 20 years
  3. Person B will need to have evidence of it being PPR if ever challenged by Revenue
  4. Half of all legal fees and sales costs for the property can be set against the capital gain by Person B
 
I am not a tax expert, but this is how I see it...

If B owns half the property,

He is disposing of 1/2 of something worth €250k for which he paid €190k - so he would be subject to CGT on €30k or €10k (with an adjustment for the PPR)

then A is receiving a gift of 125k - so there would be CAT of about €33k to be paid by A.

As both taxes arise from the same transaction, then the CGT of €10k is set off against the CAT of €33k, so B pays €10k and A pays €23k.
 
So the objective would be to have it classified as B never owning it in reality.

I don't know if this is legally possible or legitimate tax planning.

I presume that they were a couple who bought the house together and split up after 4 years and B moved out.

Take tax advice on the specifics of the transaction. Maybe make a tax return saying that B never really had a beneficial interest and Revenue might accept that.

Brendan
 
Thanks Brendan.

Yes its along those lines that they are trying to get to. B would be willing to note they have / had no beneficial interest in the property but unsure if this is possible to do?

There will be no transfer of funds / sale taking place, simply transferring sole ownership of the title deed to A. Solicitor is not getting very far in getting guidance in relation to the tax due on transfer of the title hence the reason for reaching out to the expertise here as for obvious reasons the title needs to be sorted before anything happens to either A or B.
 
You shouldn't be relying on your solicitor for tax advice on what seems to be a complex issue.

You probably need to engage a tax consultant.

Their answer will probably depend on the precise facts of the case, which seem very unclear from what you have posted. I appreciate that you are probably limited in what you can disclose online.
 
Their solicitor has reached out to a tax professional but is getting no where. No one is expecting the solicitor to determine the tax issue but they cannot complete the transaction without the guidance. Unfortunately the person they have contacted does not seem to know the answer.

There isn’t anything else to the situation other than the details provided. A & B (who are considered under category C for CAT purposes) were both named on original mortgage and title deed as 50/50 tenants in common. A has paid mortgage in full and evidence of this has been documented. The property is A’s PPR and will continue to be. B lived in the property for a period of about 4 years out of 20.

They now need to put the property fully in A’s name but drawing a blank in relation to the CGT/CAT due. No monies will be changing hands.

Is there some other information that you feel may be of help?
 
Perhaps you need to sit down and meet the tax professional to explain to them what is going on?

2 very important questions to address:

Who is the beneficial owner of the property right now?

And this:
Protocol said:
If B never paid any consideration towards the asset, can it be said that he owns it?
Click to expand...
 
Protocol said:
Has A been gifting half of the house to B?
Click to expand...
This was my first question also! No, no annual gift etc was ever documented or agreed.

Unfortunately the capital taxes are not my forte either so I’m equally confused as to B’s position re ownership.

Thanks for everyones input.
 
Smoneen said:
This was my first question also! No, no annual gift etc was ever documented or agreed.

Unfortunately the capital taxes are not my forte either so I’m equally confused as to B’s position re ownership.
Click to expand...
Was this to do with a relationship that is now over?

I dealt with a CGT case relatively recently where if I recall correctly an ex-partner of the owner had a share in the property which she had never paid for. They had split amicably years ago and the owner was now selling the property. Everything had been sorted legally between them long before the case came to me. He accounted in full for the CGT on the sale, and provided Revenue with a copy of a letter signed by the ex-partner explaining that she no longer had any claim on the property. There were no apparent tax implications for her.
 
Last edited:
Protocol said:
If B never paid any consideration towards the asset, can it be said that he owns it?
Click to expand...

Does this not happen all the time?
My partner and I buy a house. Her name is on the deeds and the mortgage.
I have the deposit - she contributes nothing towards it.
I pay the mortgage.

If we were splitting up she would certainly claim to own half!

Not only am I not a tax specialist, I am not a lawyer either.
 
Brendan Burgess said:
If we were splitting up she would certainly claim to own half!
Click to expand...
That wasn't what happened in the case I dealt with. The property had been previously in negative equity so maybe that meant there were no gift/CGT issues on the original transfer of the share to the partner, and its later unwinding.
 
The fact that there was a mortgage makes it messier. If Person A had funded the entire purchase in cash, but in the joint names of A and B, it could have easily been argued that, whilst B appeared to have 50% legal ownership, A was always the 100% beneficial owner.

What would have been really helpful is a piece of paper signed by Persons A & B, dated sometime withing the 12 months after Person B moved out, and stating the following:

- Full beneficial ownership of the property is transferring to Person A.
- Accordingly, Person A will pay all future expenses associated with the property, including the mortgage, which Person A is taking over.
- The price is 50% of the estimated current market value of the property, €X, minus 50% of the current outstanding mortgage, €Y.
- It is agreed that B will remain 50% legal owner for banking purposes only to facilitate the retention of the mortgage by A as a single person.

Based on the values in the OP, it looks like the property may have been in negative equity. To cover the value that passed either way depending on the value at that time, they should have used the €16,250 Group C threshold and agreed to a loan note to cover any excess which could then be written off €3k a year over time.

e.g. the net value of 50% was €40,250. It was paid by way of a €19,250 gift upfront and an ‘IOU’ for €21,000 which was written-off over the subsequent 7 years.
 

Yes, I realised after your post that I live in a house owned 50/50 by my wife and I, although I have paid the deposit and all the mortgage payments.

The difference is marriage.

In our case, we were married at the date of purchase, so both spouses are the owners, and both spouses are jointly and severally liable for the mortgage.

Interesting.
 
IANAL but I don't see how there necessarily needs to be a tax issue here, if the two parties are of the same understanding that the second party's name was only ever on the deeds as legal rather than beneficial owner.

This view would be supported by the facts, as to payment of mortgage, occupation of the house etc. in the intervening years. It makes perfect sense that the record of legal ownership would / could not be sorted until after the mortgage was cleared.
 
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