Assignment Of Beneficial Interest

When looking at the capital gains tax position on the disposal of property, the beneficial interest can have a significant impact.

CGT follows primarily the beneficial, as opposed to the legal interest.

It could be argued that this was just an allocation of the proceeds and providing the recipient had no other interest or rights over the property no beneficial entitlement could arise.

It has been held in various cases that if a spouse contributes directly or indirectly towards the initial cost, or towards mortgage instalments, he/she acquires, in equity, an interest in the matrimonial home proportional to those contributions even though the other spouse alone is registered as the legal owner.

So the title holder is not necessarily the one subject to CGT on the disposal.

Good examples of this are bare trustees and nominees.

Example Jack bought a house in January 2007 for £50,000 and occupied it with his wife until January 2008, when they separated.

He bought a new house for himself whilst she remained in the matrimonial home. In August 2014 the Court ordered that Jill should be given 1/3 of the proceeds of sale of the matrimonial home. The gain accruing to Jack is computed as follows £ Disposal proceeds 180,000 Less Cost 50,000 Net gain 130,000 Jacks Private residence relief Period of ownership January 2007 - January 2015 = 8 years Period of only or main residence: January 2007 - January 2008 = 1 year last 1.5 years = 2.5 years PPR relief = 2.5/8 * £130,000 = £40,625The chargeable gain is £89,375 before the annual exemption.

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