Any accountants around? What is a partnership? CGT related.

[Choux]

My parents have rented out a commercial property for 30 plus years. They had a business account at their bank in joint names and each declared 50% of the rent on their tax returns but were not a limited partnership for tax purposes.

In the last tax year they sold the property. It transpired that the property was in my mum's name only.

We need to make a capital gains submission. Given that the rent and the sale proceeds went into their joint account and any expenses over the year were paid for out of this joint account can they each report 50% of the gain on their tax returns and deduct the £12k to get the taxable gain? Or is the gain deemed to be solely my mum's as she was the legal owner of the property?

I am an accountant but a bit out of practice with small businesses and tax (I’m in banking audit). My husband works in tax though so I’ll ask him to make sure. Both qualified. First thoughts are it has to go against your mum. If she had sold it to a partnership ( doesn’t need to be limited liability, just a sole trader type partnership) and then they had each done a tax return and a partnership return/accounts too and then sold it then they could share the gain . However I assume the paperwork showed just your mum as the seller and it’s not something that can be retrospectively fixed.

I have just read this which differentiates between legal owner and beneficial owner. I can show rent receipts, exps and sales proceeds went into a joint account. We have no record of the purchase proceeds coming from the joint account as it was so long ago.

And although this property is in my mum's name, there is a second neighbouring property bought at the same time which is in my dad's name. I think this also demonstrates intention to share all assets. If only they had put both properties in joint names...

www.taxationweb.co.uk/tax-articles/property-taxation/capital-gains-tax-and-beneficial-ownership.html

Ohhh more info, this might change my view as you are full on in to proper accounting territory now. Will think it over.

www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22020

www.taxinsider.co.uk/putting-an-investment-property-in-joint-names-before-sale

I’d say it’s arguable, but more frustrating that the legal ownership wasn’t changed prior to selling as transfers between spouses take place at no gain no loss.