Property - Legal Ownership Issue and Tax

T.C.

My client has a property in his name, although his father actually owns the property (albeit not in paper).
My client's father has been receiving rent on the property.
My client's father now wants to sell the property.
My client is concerned that when he sells the property it will be shown that he owns the property on paper and will be liable to any capital gains on it, and of course any tax on rent payments if an investigation shows that rent was received. And of course any penalties because my client failed to mention the existence of this property in a tax enquiry about 3 years ago.
My client is really scared that this will put him in prison. He wants my help.
Any advice welcome.

PGM

I'd suggest the client and father draw up a contract between each other outlining the agreement,
ie its bought by the client acting as guarantor for the father, but all costs and revenues will be attributed to the father, until the contract is terminated by both parties.

Although I couldn't say if the HMRC would accept all of this!!

T.C.

Thanks, that is a good idea and something they will be happy to do. Just one other thing, the capital gains - as the legal owner of the property, does my client have to show this on his TR, or as the 'real owner' can my client's father show this on his TR? More help appreciated.

PGM

I thought your client was going to live in it as the main primary residence prior to sale

T.C.

Oh, yes!!!! He moved in a couple of months ago!!!!.... but wouldn't he still have to enter a CGT page?

PGM

T.C. wrote: »

Oh, yes!!!! He moved in a couple of months ago!!!!.... but wouldn't he still have to enter a CGT page?

I wouldn't like to guess on this one, maybe a question for the solicitor? Tax specialist? I recently moved house and there's a few more hoops to jump through than when I moved a few years ago.

T.C.

I think I have my head around it. He lived in the house originally, so nothing to pay there. He then 'sold' the house to his dad (money did change hands). Contract put in place but ownership not officially changed over. So now client moves back in house to sell for father. He will put in CGT pages in TR excluding the time it was his main residence and pay CGT on the profit. That sounds right, yes?

PGM

T.C. wrote: »

I think I have my head around it. He lived in the house originally, so nothing to pay there. He then 'sold' the house to his dad (money did change hands). Contract put in place but ownership not officially changed over. So now client moves back in house to sell for father. He will put in CGT pages in TR excluding the time it was his main residence and pay CGT on the profit. That sounds right, yes?

Wouldn't it be in his father TR if he's bought it, and it would then be for the full period since buying it from his son?

And your client should really have included it in his TR when he 'sold' it?

Unless it was sold without profit, and maybe better to do the reverse and sell it back to the son. He could then live in it prior to sale and there wouldn't be any capital gains to pay?

T.C.

Unfortunately nothing was done legally!