Transfer of property to relative’s company

In 2012 the taxpayer who was in financial difficulty wanted to raise a mortgage on his property but was unable to because there was a charge on it. He transferred the property to a relative’s company and the relative took out a mortgage on it to advance funds to the taxpayer. In 2018 the property was transferred back to a company owned by the taxpayer. The taxpayer said the relative’s company had held property on implied trust but he had retained beneficial ownership throughout.

HMRC disagreed and assessed the first transfer to capital gains tax. The taxpayer appealed.

The First-tier Tribunal said there was no reference to a trust in the transfer documents. The judge said: ‘A bare trust of land cannot simply be willed into existence in the absence of a valid legal instrument to declare such a trust.’ The business reality was that the transfer...