Tax implications of Adding my name to spouse's mortgage

[maths]

Steve 234, apologies. Unfortunately, matters often perceived by many as straight forward often aren't. Hopefully by argument and discussion you end up with the right answer,

I set out my view as stated above which I believe is correct:

As her property is now the main residence of both of you then any transfer of part of the beneficial interest to you will be treated as occurring at the date of the transfer, at a % of the original cost (to your wife ie no gain or loss) and you will also be treated for CGT purposes as if you had owned that interest from the date of the acquisition by your wife (ie any period of living in it on her part will also be treated as if you had lived in it etc).

However, any lettings relief available to her will not be available to you (as incredulum above suggests) but an extra £10,600 of exempt gain will now apply.

Whether from a CGT perspective a transfer is CGT efficient will depend upon the actual numbers

If I may say, Incredulum's raises an interesting s 58 point but his suggestion is not in my opinion correct and I would not base your decisions upon it; no doubt he will add his comments.

[maths]

Incredulum

The legislation as drafted did permit indexation to increase a base cost for CGT purposes and hence the possibility of "banking" it prior to its abolition by effecting inter-spouse transfer..

However, "banking" of taper relief was not possible by this route; taper relief was very much in line with the relief re main residence as, in broad terms, the transferee spouse stood in the shoes of the transferor. If on an inter-spouse transfer the base cost of the transferee could be increased by taper relief or LR and yet at the same time the transferee's acquisition was back-dated "double counting" would occur.

[Incredulum]

OP, for your purposes, Maths's post at 5.04 yesterday will cover everything you need. I apologise for hijacking your thread, and I think you should completely ignore my theoretical exercise which certainly does not follow accepted practice.


Maths. I agree, taper relief works in a very different way to indexation. In s2A TCGA (you will need your old Butterworths) the gain continues to be there, but in 2A(2) "the amount [of gain] on which capital gains tax is taked to be charged shall be reduced to the amount computed [in a way so convoluted only Gordon Brown could have invented it]." This is telling us how we tax a gain that we have computed - by applying tax to a reduced gain.

It would not be possible to "bank" taper relief in the way you suggest - as one could bank indexation - on a ng/nl transfer, as there if you are tapering a gain there is always a residual gain - so it could not be ng/nl. The only value at which it would be ng/nl would be at the indexed base cost amount - at which point there would be no gain to taper.


s2A is not written in the same way as s222, the latter stating that the gain shall not be a chargeable gain at all - in a very similar way to s53 which gives "an allowance to be set against the gain so as to give the gain for the purposes of this Act". I currently stand by my analysis, but am open to persuasion, I agree it's not a conventional interpretation but the legislation does often surprise us!

[Incredulum]

Re your other s58 issue, as an aside, would an extension of your argument not also require ... to be taken into account and/or capital losses?

I missed your capital losses point. Again, no as the losses are used in computing the tax, not the gain. The losses do not reduce the chargeable gain on a particular transaction - and hence define the ng/nl value at which an asset would be transferred. The losses are used as s2(2)"Capital gains tax shall be charged on the total amount of chargeable gains accruing to the person chargeable in the year of assessment after deducting (a) any allowable losses accruing... in that year, and (b)... any previous year."