That DTE brief s58 TCGA; s222(7) TCGA etc.

[Incredulum]

There are several threads that have debated this interaction. I thought it might be helpful if we put this into a single thread.

I think that the DTE brief is wrong. And I think the reason it is wrong is because it - and Peter D - do not interpret s58 correctly. And their misinterpretation is a widely held misunderstanding. I had a long argument with our Big Four tax partner on this point, and to quote his words "totally shattered" his idea of how no gain/no loss transfers work.

Rather than resurrect an ancient thread that I found when trying to find out about the DTE brief, http://www.taxationweb.co.uk/forum/dte-tax-brief-on-principle-residence-reliefs-t26871.html here is a key quote

An inter spousal transfer of a 'property', whether it is you home, your former home or in fact a rental property you have never lived in, or a garage you own, will transfer the property on a no gain, no loss basis and the new owner inherits the original date of purchase.

I think the above quotation shows exactly where you and the DTE go wrong. This is not correct; s58 TCGA deems NOT that the original date of purchase is inherited, BUT that the transfer is no gain no loss.

In calculating indexation (which of course still applies for companies), we assume a shorthand that the transferee's acquisition date is the transferor's acquisition date. Therefore people are in the habit of incorrectly assuming that no gain/no loss transactions include an acquisition of the transferor's history. IN FACT, on the transferee's acquisition, the transferee is acquiring it ON the transfer date, AT A VALUE that means that the transferor has disposed of it no gain/no loss. There is no acquisition of history, save for where the legislation says that there is. Two such situations spring to mind:

1. Taper relief, where certain interspousal transfers allowed the acquisition of history - fortunately this convoluted legislation has been consigned to the bin.

2. s222(7) where the history is inherited provided (a) if the one disposes of the dwelling-house which IS their only or main residence to the other.

Unless the dwelling-house IS their only or main residence and you fall into 222(7), then there is no acquisiton of history.

If you make that error in applying s58, then I can understand the DTE analysis... but it is wrong when they do so.

[Incredulum]

Simons C2.1305 says

Transfers between spouses or civil partners
Where a spouse/civil partner disposes of his interest in the only or main residence to his spouse/civil partner, or vice versa, or where the one dies and the house passes to the other on intestacy, or under his or her will, whether beneficially or as trustee, the other spouse/civil partner is placed in the shoes of the disposing spouse/civil partner in relation to the commencement of the period of ownership, which accordingly is antedated back to the date when the disposing spouse/civil partner acquired the house4. If the dwelling house was not the only or main residence of both parties throughout the period of ownership of the one making the disposal, account is taken of any part of that period during which it was his (or her) only or main residence as if it was also that of the other5. This usually benefits the transferee spouse/civil partner, but it can work to his or her disadvantage by restricting the availability of the relief where, for periods before the transfer, the dwelling house was owned by the transferor spouse/civil partner but it was not his or her main residence (see example below).

The final sentence the point point that 222(7) can work to the transferee's disadvantage by restricting the availability of the relief for the pre-occupation period. This, however, is under the circumstances of (sentence 1) "Where a spouse/civil partner disposes of his interest in the only or main residence." The final five words indicating that this is only in point when the property in question IS the OMR. In an example of a HK resident purchasing the property and transferring it to his wife before they move in, then quite clearly the property IS NOT their OMR - for they have never even lived there at the time of transfer.

[Peter D]

If the property was not 'an only or main residence' there would be no relief's to be had.
Simons C2.1305 says if perfectly correct and commensurate with the DTE brief on this matter.

If H purchase the property from HG and then 'Sold' it to W just before leaving HK and later W sold it she would have a period of ownership where part would be exposed to CGT due to the inherited date of acquistion and a claim to PPR from the date she acquired the house for her PPR although actually moving in may be a couple of months or so later.

When this type of thing last came up several senior tax consultants were contacted one of which was the former director of the DTE and they all had the same interpretation of the law and supported the DTE Brief.

Regards Peter

[Incredulum]

due to the inherited date of acquistion

What part of the legislation deems there to be an inheritance of the acquistion date? I cannot see anything other than a misunderstanding of s58 (as per my quotation of your words in my OP) that can do this.

You repeat this assertion several times in the thread to which I link:

An inter spousal transfer of a 'property', whether it is you home, your former home or in fact a rental property you have never lived in, or a garage you own, will transfer the property on a no gain, no loss basis and the new owner inherits the original date of purchase.
I am not sure what you are trying to achieve by questioning this. Regards Peter

Do you accept that this is NOT the result of s58?


Finally, what is DTE? I have never heard of it/them, and google brings up nothing.

[Peter D]

I've just found the email and it was 'Deloitte' and 'Arthur Weller' and they go with the DTE Brief. Regards Peter

[AvocadoK]

Incredulum,
Presumably the bit you disagree with in the DTE brief is where it refers to a transfer of a house which is not the main res.It says:

"(i.e the transferee is still deemed to have acquired the property backdated to the date of acquisition by the transferor but entitlement to reliefs is based on the transferees own position)"

I tend to agree with you. There is no legislative support for this statement. As you say, under s58, the actual date of acqn by the transferee is the date of the interspousal gift, not the transferor's acqn date. Section 222(7) only makes you look back to the transferor's ownership period when the house was the main res at the time of transfer - otherwise, you don't.

I think HMRC manuals summarise it correctly at
http://www.hmrc.gov.uk/manuals/cg4manual/CG64950.htm

You can find DTE by googling for DTE accountants.

Regards

AK

[Peter D]

You will note that all the examples given within TCGA92/S58 include Indexation as that was permissible at the time and S58 resolved the issue of interspousal transfer and no gain/no loss so the indexation had to be computed at the date of the transfer. The original OP best bet is if HMRC regards the transfer from H to his wife as a 'sale' and not an 'interspousal transfer'. Regards Peter

[Incredulum]

Peter D

1. I take your silence as your assent that this following quote is incorrect. Please confirm.

An inter spousal transfer of a 'property', whether it is you home, your former home or in fact a rental property you have never lived in, or a garage you own, will transfer the property on a no gain, no loss basis and the new owner inherits the original date of purchase.
I am not sure what you are trying to achieve by questioning this. Regards Peter

2. What do you mean by the following

The original OP best bet is if HMRC regards the transfer from H to his wife as a 'sale' and not an 'interspousal transfer'.

s58 applies to all transfers between spouses. What is the distinction you are trying to draw here?


3. Finally, I cannot say that I am over-impressed by the sources of the advice firstly from "DTE" who whilst they appear to be 29th largest firm in the UK I have only ever heard of one of the firms between 20th and 60th largest http://tinyurl.com/ya2zorp and Arthur Weller who is a sole practitioner who offers to solve virtually any tax problem for £90, and PeterD is not prepared to share the advice he has from Deloitte purportedly agreeing with him. Is there anybody else on here who agrees with DTE/PeterD?

[Peter D]

"I take your silence as your assent that this following quote is incorrect."
Not at all, it means I have nothing to add. If I change my view then I will post same.

I am not aware that the DTE published their Tax Briefs, they charge for them. The link you referred to did not, from memory, post the whole section of the PPR brief due to copyright.

Good luck with your crusade.

Regards Peter

[Incredulum]

"I take your silence as your assent that this following quote is incorrect."
Not at all, it means I have nothing to add. If I change my view then I will post same.

OK. So your view is that s58 deems the transferee to have acquired the item on the date the transferor acqured the item?