How to transfer a share of my btl to my wife?

[euroman]

Hi there.
Peter has been so kind to help with some advice with cgt when I sell my btl which I need to do since losing my job in 2010.

I earn no income but my wife earns around 17k a year ( just checked her p60). It was suggested I could gift my wife a share in my btl so we could claim both our allowances for cgt purposes.
I bought the property for 110k and hope to sell for around 150k giving me a net gain of 40k. I have never lived in the property. I have a 80k mortgage on the property.

I wish to know what I should now do to give my wife a share in the property? Do I simply find a solicitor to do this and do I have to notify my mortgage company of the share? If I were to give my wife a share - how much do I give her so we can claim both allowances?

If anyone can help me I will really appreciate it.

Ben

[pqtaxation]

Do I simply find a solicitor to do this and do I have to notify my mortgage company of the share? If I were to give my wife a share - how much do I give her so we can claim both allowances?

Shortly before exchange of contracts (when you know sale price and likely capital gain) ask your conveyancing solicitors to prepare a deed for you to execute so as to transfer a 30 to 50% beneficial interest to your wife so that her annual exempt amount for capital gains (currently £10,600) is available but you can sell her interest as her bare trustee. No need for anything else or to notify mortgagor.

[maths]

You appear to own the legal and beneficial interest 100%.

Likely capital gain circa 40K; annual exempt amount 10,600.

I suggest you ask your solicitor to prepare a declaration of trust asap under which you declare that you own the legal title on trust as to yourself 70% beneficially and your wife 30% beneficially. It should also confirm that she also agrees to discharge 30% of the mortgage.

This means that if the capital gain is circa 40K the wife makes 12K which is absorbed roughly by the 10,600.

No need to inform mortgage company as no change to the legal title.

The transfer gives rise to no CGT or SDLT.

The reason for the action to be taken asap is that any attempt to transfer close to exchange may well be challenged by HMRC.

[pqtaxation]

The reason for the action to be taken asap is that any attempt to transfer close to exchange may well be challenged by HMRC.

Is there any case you can refer?

[maths]

It is important that at the date of exchange that H and W are each disposing of their respective beneficial interests.

H whilst owning both the legal and beneficial interests instructs estate agents to market the property. In due course a potential buyer is found and an “in principle” agreement to sell is agreed between H and purchaser (even though of course such agreement is unenforceable). H then seeks to transfer part of his beneficial interest to W. H and W exchange contracts with purchaser.

It is strongly arguable that the purported transfer from H to W fails to transfer the beneficial interest and that W is simply acting as a nominee for H. The sale is thus the sale of 100% of the beneficial interest held by H.

The interposition of the step re the transfer from H to W is nothing more than an artificial step without any commercial necessity (designed of course to avoid CGT).

Inter-spouse transfers are generally not subject to attack from HMRC as in principle they accept this is acceptable tax planning; however, HMRC reserve the right to attack such transfers.

It is therefore sensible to reduce the risk of any attack and not to have to argue the point in the first place.

[Incredulum]

The reason for the action to be taken asap is that any attempt to transfer close to exchange may well be challenged by HMRC.

Is there any case you can refer?

Ramsey et al. No point in playing with fire if you don't need to.