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Where Taxpayers and Advisers Meet

CGT Advice Needed

8thegeorge
Posts:42
Joined:Wed Aug 06, 2008 3:24 pm
CGT Advice Needed

Postby 8thegeorge » Tue Jun 22, 2021 11:34 am

Hello
The house in which my wife and I live is registered in my wife's name on Land Registry. She also owns another house which she bought about twenty five years ago for her mother to occupy. Because my wife became her mother's carer she saved the state a considerable amount of money by avoiding care home fees until eventually her mother did go into a home. The second house was then rented out in order to service the care home fees. Since her mother died the property has continued to be rented out. The house was bought for some £50,000 and is now worth approximately £250,000. My wife does not wish to continue renting the house out, once the existing tenants return to Poland in maybe twelve months, and therefore will place the house on the market. CGT is then payable on the difference between purchase and sales price.

My question is: if my wife signed the second house over to me thus making me the legal, registered owner, would CGT still be payable on eventual sale of the house?

We both feel that CGT is unfairly penalising my wife especially when she has ensured that her tenants have been treated exceptionally well. Sadly the first and second couple betrayed my wife's trust and left the house in a mess thus requiring hefty remedial work. The present tenants are absolutely superb in every respect and therefore the rent has never been increased since they took over the tenancy six years ago.

Look forward to advice either yea or nay!!

Jholm
Posts:184
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT Advice Needed

Postby Jholm » Tue Jun 22, 2021 2:57 pm

Upon sale (or even transfer to anyone other than spouse) CGT is going to be payable whether she owns it, you own it or a split. On the basis neither of you ever lived in it, no PPR relief will be available.

You can consider transferring half the ownership via a deed of trust, which will give you use of both your tax-free annual exemptions and make the most of the available basic rate bands (assuming you are not already higher-rate taxpayers).

I don't mean this to sound blunt at all but the fact there were tenants is off-topic for CGT. However, any CAPITAL costs (renovation, enhancements) that would not be eligible for relief against the rental income received, can now be claimed upon sale. I imagine you may have claimed all 'post-tenant recovery costs' against the rental income already???

8thegeorge
Posts:42
Joined:Wed Aug 06, 2008 3:24 pm

Re: CGT Advice Needed

Postby 8thegeorge » Tue Jun 22, 2021 3:42 pm

Thank you very much for your reply. I do note that you bracketed "or even transfer to anyone other than spouse". Does that mean that CGT would not be payable if my wife transferred the property to me FOC but I assume that I would be then liable for CGT if I then sold the house?

Jholm
Posts:184
Joined:Mon Mar 11, 2019 4:22 pm

Re: CGT Advice Needed

Postby Jholm » Tue Jun 22, 2021 3:59 pm

Correct, if she transferred 100% to you, no CGT arises but you will assume her original base cost. So ignoring your own tax rates, the capital gain itself would be identical in your hands as hers.

Most tax efficient way it seems (based on info presented) would be to transfer half to you, due to 2x AEs (annual exemption) and potentially extra basic rate band. When selling, you then declare 50% of each figure as your own.

8thegeorge
Posts:42
Joined:Wed Aug 06, 2008 3:24 pm

Re: CGT Advice Needed

Postby 8thegeorge » Sat Jul 10, 2021 9:50 am

Thank you very much for your advice. Obviously not what we hoped for but most likely what we expected!!!


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