I took out a second mortgage around 12 years ago to help my brother so he could buy out my other brother on a property in Manchester that they shared. At this time, I was living in my own mortgaged house and continued to do so until I sold it earlier this year (May). I now live in rented accommodation. I own the Manchester property in name only and have never lived there. The mortgage payments were paid directly from his account, and I do not stand to make any profit on the transfer. I no longer wish to have the house in my name as it is potentially affecting my ability to get a mortgage and I would like to return it to him. I require advice on the best way to do this without attracting huge tax bills, etc. If the house is transferred to him, I understand there is a requirement to pay tax on profits as it’s a second home, etc. I've read that I may be able to gift the equity and he can take out a mortgage for the balance (£115,000) and pay stamp duty land tax on this amount. However, I’m just not sure, in particular, about capital gains tax. My accountant and conveyancer have different ideas and are looking at it from different angles! The house was originally bought for £150,000 and is now worth circa £300,000 (maybe a bit more); the mortgage outstanding is £115,000. 

Arthur Weller replies:  

From what you have described, it appears that you have simply been the legal owner or bare trustee nominee from day one, but your brother has been the beneficial owner all along; see HMRC’s Capital Gains manual at CG70230. If so, I suggest you ask your solicitor to draw up a declaration of trust showing that this has been the case since 2010 (see HMRC’s Trusts, Settlements and Estates manual at TSEM9520). When this is in place, it is a simple matter to change the legal ownership from you to your brother, and there should be no capital gains tax consequences (see CG12704 and CG10720). However, the mortgage will need to be dealt with.