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HMRC internal manual

Trusts, Settlements and Estates Manual

Ownership and income tax: implied trust: constructive trust - basic principles

In the context of this guidance, the basic principles are that to establish a common intention constructive trust three questions have to be answered in this order:

  1. Was there an agreement or common intention that the parties should share beneficial ownership of the property? See TSEM9720.
  2. If so, did the party claiming act to his or her detriment (disadvantage) in reliance on that agreement or common intention or change his or her position? See TSEM9730.
  3. If so, what is the size of the beneficial interest to which the claimant is entitled? See TSEM9740.

If taxpayers attempt to rely on the decisions in the cases of Oxley v Hiscock [2004] 3 All ER 703) (sole legal title) or Stack v Dowden [2007] UKHL 17) (joint legal title), you should point out that those cases relate specifically to the ownership of the matrimonial or quasi-matrimonial home. The cases are likely to be of limited application where it is not ownership of a domestic home that is at issue, but land or buildings rented or personal property.