Reducing future CGT liability on second home

[JOHNRE]

Hello there....
In April 2014 we purchased an apartment in Manchester. Our intention was to retire there in a couple of years. In the meantime we would rent it out, so we put the apartment in my wife's name. She is a non-taxpayer and I am close to the 40% bracket.

What actually happened was that our son returned from Brazil and, for the past two years. he has lived there (no formal agreement etc).

During the next few years he is likely to spend a year abroad and then about 18 months back at the apartment, and so on. At some point down the line, we will want to sell the apartment and are looking for ways to reduce this liability. Some questions....

1. If, when he is in the UK, we rent out the property to him via an AST, would those periods qualify for Letting Relief on the final CGT bill?

2. Potentially,we may be interested in gifting him a share of the apartment so that, officially, the apartment would be his PPR and, presumably, when we sell, that would minimise the CGT payable on his share?

3. If we gifted him a 50% share of the property straight away, am I right in thinking that the CGT liability on the gift would be on the increase in value of the 50% share she is gifting (rather than the total increase in value of the asset)? The flat has gone up around £20K since purchase. My understanding is that this £10K would be within her annual CGT allowance of £11,000? (although I have also read that because the value of the gift is greater than £44K she would have to declare it on a tax return).

Any advice would be greatly appreciated.

Thank you

John

[bd6759]

You need to be careful with your terminology. Your assert that the property belongs to your wife, yet says "if WE gift it". That suggests you have a beneficial interest in the property.

That aside, if your wife gifts half to your son it will be a disposal, but if your valuations are correct it will be within her CGT allowance.

Your wife will only get lettings relief if it is at some point your PPR.

[JOHNRE]

Thanks for the very prompt reply, bd6759. Just to be precise, the apartment is completely owned by Mrs R and I have no beneficial interest in it, so it would her "gift" to the first born. Thanks for the clarification on the cgt gains. That is what I had assumed (with my limited knowledge).