Does anyone have a view or experience of the following scenario:-
Deceased owned an investment property with his business partner. It has come to light that the property was held beneficially as joint tenants. I understand that there is a presumption in law that business property is held beneficially as tenants in common. Most of the estate is covered by spousal exemption but the half value of the investment property is over the NRB. I am wondering how to report it on the IHT400.
There is no declaration of trust in place and the conveyancing file is not available.
We have proposed a Deed of Variation but the commercial solicitor has suggested Deed of Rectification is more appropriate.
Not my area but, assuming its a commercial property, is there any scope for saying that the property is a partnership asset and therefore, irrespective of the title, it falls to be divided on death in accordance with the partnership agreement or, failing that, under the general rules (i.e. that the partnership is dissolved and the capital account, including the property, is divided between the partners).
The deceased’s half would then pass in accordance with his estate without need of any rectification or variation.
You do not say what the evidence is that an equitable joint tenancy subsisted. You imply also that the other co-owner is apparently amenable to not being the owner of the entirety by survivorship. The two together make me wary of offering an analysis.
If 2 co-owners or their successors in title are ad idem that an equitable tenancy in common is an acceptable position AND there is no cogent evidence to the contrary a deed of rectification will bind the parties to it and any third party not so bound will have an uphill struggle if minded to challenge it. HMRC being a potential one such.
If there is cogent evidence that an equitable joint tenancy subsisted then a deed of variation is needed which will not bind third parties, so the parties to it must ideally comprise all those who might have an interest in challenging it. HMRC are interested in whether the s.142 IHTA/s.62(6) TCGA conditions are fulfilled if reading back is desired but they also have a limited interest in ensuring that the variation is legally valid e.g. that all parties necessary for that execute the IOV. But they do not guarantee that so if the document is successfully challenged by someone else they will sit back and await the result and then tax the revised outcome.
Presumptions of law are just that. They must yield to admissible contrary evidence. The presumption of a tenancy in common with business co-owners and of an equitable joint tenancy in a domestic context are thus both subject to the evidence either way. The obvious starting point is the legal title, presumably registered. Are both co-owners registered and if so is there a Form A restriction or is only one registered or even a third party? This is not conclusive but again there is a presumption that the equitable position follows the law: no Form A then equitable joint tenancy subject to contrary evidence. The presumption with partnership property of a tenancy in common is frequently overridden by the partnership agreement. Property investment is a venture that the 1890 Act alone is unlikely to recognise as business conducted in partnership but the more elaborate it is the more likely, I suggest, that any presumption of an equitable joint tenancy is to be countered. This may turn on any written agreement and some such (like commercial joint venture agreements) specifically disavow the existence of a partnership.
The case of Texeira v Moaven [2026] 1215 EWHC (Ch) is instructive. Declarations of trust purporting to clarify pre-existing equitable interests in properties were set aside as shams and had potentially unpleasant consequences for the parties to them and the lawyer who drafted them. This was an extreme case but underlines the risk in general of drafting a document without due regard to the available evidence of the relevant facts and intentions.
I suggest that if the context is tax saving a deed of variation is preferable than asserting by a deed of rectification circumstances for which evidence is scant, notwithstanding the current acquiescence of the necessary parties.
To clarify, the property is registered in the joint names of the deceased and his business partner. There is no Form A restriction. There is no partnership agreement.
The business partner, whilst amenable, now seems to be using the proposed Deed of Variation as a bargaining tool with regards to other matters concerning dissolution of the business.