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Where Taxpayers and Advisers Meet

CGT and wife on deeds

paulstafford
Posts:4
Joined:Fri Apr 13, 2018 8:43 am
CGT and wife on deeds

Postby paulstafford » Fri May 04, 2018 1:12 pm

Hello

I have a rental property that I own in my name. I wish to add my wife to split the rental income between us. Will this count as a transfer for the purpose of CGT? There is a mortgage currently and I know I would need to approach the provider, however, there is not that long to go, so if waiting till that is paid off would alter the situation, I can do so.

As a further question, I originally lived in this house as my main residence for 2 years, prior to it being rented out. If I one day want to sell the house, it may make sense to remove my wife from the deeds and once again have it solely in my name, so I can once again claim the private residence relief and letting relief. My wife has never lived in the property.

In essence, I am hoping to avoid overpaying income tax whilst I rent it and capital gains when I sell it by adding and then later removing her. Obviously this is only going to work if adding / removing her is not considered a transfer. I believe a spouse being added is not considered so, but my purpose for posting is to double check this and my understanding of the rules in general.

Many thanks in advance for replies.

AGoodman
Posts:1738
Joined:Fri May 16, 2014 3:47 pm

Re: CGT and wife on deeds

Postby AGoodman » Fri May 04, 2018 3:00 pm

Yes it is a disposal but it is no gain/no loss so no tax to pay. Your wife will receive her share at your original base cost.

Your PPR masterplan would not work because the share transferred to and from your wife would have been BTL for the duration of your ownership (i.e. from the date she transferred it back). You could not count the first period of ownership.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT and wife on deeds

Postby maths » Fri May 04, 2018 6:30 pm

I'm a little unclear as to AG's comment.

H owns 100%.Property was H's sole residence for 2 years.
H transfers 50% to W.

As an inter-spouse transfer (at a time when property is let out) no gain arises and the base cost of W's 50% is what the base cost was to H.

W transfers her 50% back to H (again whilst property a BTL).H now owns 100% again.

On a sale by H of his 100% (assume property held for 10 years in total) then 2/10ths of total gain would qualify for PPR (ignore last 18 months for ease).

The balance of the period of ownership would qualify for lettings relief (again ignoring last 18 months).

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: CGT and wife on deeds

Postby bd6759 » Sat May 05, 2018 10:46 am

I favour AG;s interpretation.

PPR relief is lost on the part transferred because the property was not their residence at the time of the transfer.

maths
Posts:8507
Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT and wife on deeds

Postby maths » Sat May 05, 2018 7:02 pm

When H sells owning 100% (after wife transferred the 50% back to him) he is selling a single beneficial interest.

He is not selling a 50% interest which he owned throughout and a 50% interest he has owned only from date wife transferred it back.

As a consequence, as per my example above, if the property had been owned for 10 years and was his PPR for the first two years 2/10ths qualify for PPR.

The fact that the 50% transferred back to him was then owned at a time when the property was a BTL is irrelevant in calculating PPR relief for him on his 100% sale.

You don't calculate the gain on the 50% he retained throughout (qualifying for PPR) and separately the gain on the 50% transferred back to him with the latter 50% failing to qualify for PPR.

paulstafford
Posts:4
Joined:Fri Apr 13, 2018 8:43 am

Re: CGT and wife on deeds

Postby paulstafford » Mon May 07, 2018 10:21 pm

Thanks Maths
I felt my plans had legs but wanted to bounce them off someone else first


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