An English woman (the Appellant) who bought three foreign properties in her former partner’s name to avoid paying Capital Gains Tax (CGT) has been told she cannot “have her cake and eat it”.
The Appellant was in a relationship with a Brazilian woman (the Respondent) for 11 years and they viewed their partnership as ‘akin to a marriage’.
However, after they separated in 2007, the parties engaged in a dispute over the distribution of their assets, which included two properties in the UK and a flat and two plots of land in Brazil.
A High Court judge ruled that the majority of the disputed assets should go to the Appellant, while the respondent should keep the Brazilian properties, which had been purchased in her name.
The appellant challenged that ruling at the Court of Appeal, arguing that she alone had paid for the Brazilian properties and had only transferred them into the respondent’s name in order to avoid potential CGT liabilities. She argued that she had not fully understood Brazilian law and believed that it would be possible for her former partner to be named as sole legal owner of the properties whilst she, the Appellant, would retain the equitable interest in them.
However, her appeal was dismissed by three senior judges, who ruled that the Appellant could not put the properties in her partner’s sole name for tax reasons and then later claim beneficial ownership of them.
Lord Justice Rimer said that the consequences of putting the Brazilian properties in the Respondent’s sole name must have been clear to the Appellant, a professional woman, at the time.
The judge, sitting with Lord Justice Thorpe and Lord Justice Patten, concluded: ‘The judge found that the tax considerations did lie behind the proposed transfer.
‘The only way in which the tax-saving measure could have worked, and the only way in which the Appellant would have understood that they would have worked, was on the basis that the Respondent was named as the owner of the properties in Brazil – not just as the legal owner of them but as the beneficial owner of them.
‘She plainly intended to achieve that; otherwise it would have been the case that the tax-sheltering she intended to achieve would not have worked.’