Owning property in joint names
Married couples will often buy property and land in their joint names.
However, it does not automatically follow that the husband and wife own the value equally and will continue to do so – they are free to agree otherwise.
In the recent Northern Irish case of Watson v Revenue & Customs, Mr and Mrs Watson were in partnership running a petrol station. They owned the land in their joint names and this was included in their partnership accounts.
Due to ill health, Mrs Watson retired from the partnership in 1998 when Mr Watson continued alone as a sole trader; the capital account (including the land) was then shown in his sole name even though the deeds remained in joint names.
In 2005, Mr and Mrs Watson sold the land for £1.6m and part of the proceeds were paid into a joint account, used later to buy a farm, with the balance used to discharge business loans in joint names. The farmhouse was registered in Mrs Watson’s sole name (where she and her daughter lived) and the farmland was registered in Mr Watson’s sole name (he lived elsewhere).
Mrs Watson declared a capital gain on the sale of the land and claimed roll-over relief in respect of the farmland. HMRC rejected her claim.
Later, Mr and Mrs Watson signed a declaration that Mrs Watson retained no interest in the partnership assets following her retirement in 1998. On appeal to the First Tier Tribunal, Mrs Watson argued that it had been their common intention that on retirement, she would give her partnership share to her husband absolutely.
Despite some discrepancies in the evidence, the Tribunal allowed Mrs Watson’s appeal because it accepted that her husband had relied on this common intention to his detriment.
Accordingly, whilst the deeds to the land remained in the joint names of Mr and Mrs Watson, in 1998 Mr Watson had become the sole beneficial owner for tax purposes.
There are many overlapping taxes at issue where a couple jointly owns land or property. By signing a declaration of trust and reviewing this, a married couple can alter their beneficial ownership between them to suit their circumstances and put this beyond doubt for tax purposes.
Should you have any questions about your arrangements, our approachable and experienced solicitors are here to help. Contact the team on 01473 611211 to arrange an appointment.
A version of this article recently appeared in the East Anglian Daily Times.