We are currently selling a property that was purchased using money that was gifted to me by my father-in-law. Our main question is: will we need to pay capital gains tax (CGT) on the gain even though we, as the legal owners, have not lived in the property and will not be benefitting from the gain as all the profit of the sale will be gifted back to my father-in-law? We would like some guidance on how to proceed with this with HMRC and on who is liable for the tax. 

Arthur Weller replies  

From what you have written, it appears that you are liable to the CGT since you are the legal owners, and the presumption is that beneficial ownership follows legal ownership (see HMRC’s Capital Gains Manual at CG65421). And CGT follows beneficial ownership (see CG70230 and CG11700P). However, since your father-in-law provided the funds for the purchase, and the sale proceeds will revert to him, it is worth discussing this matter with a tax adviser because there may be other factors (not mentioned) that point to him being the beneficial owner.