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Where Taxpayers and Advisers Meet

CTG on ex marital home when splitting profits with wife / ex wife

digitalsoul
Posts: 1
Joined: Fri Apr 06, 2018 6:40 am

CTG on ex marital home when splitting profits with wife / ex wife

Postby digitalsoul » Fri Apr 06, 2018 6:51 am

Hi

I am about to sell my property under the following circumstances

I have a property that is in my sole name, but that I have not lived in for over 3 years following a seperation
My wife and children have remained in the property all this time
I am currently going through a divorce and this may complete before the property sells
I have verbally agreed to give my wife / ex wife 60% of the money from sale (this is not in writing)
I intend to use my 40% towards a new property of my own after the sale

If the house was bought for 165 and sells for 215 and I take 40% of the profit (20K) and transfer the rest to my wife / ex wife whats my CGT situation?

Does it make a difference if the divorce is finalised or Im still married?
Does it make a difference if I sell chain free and then buy chain free after the sale or dont do this and transfer the sale money direct into new home?
Do I need to get something in writing regarding the 60% I give my wife to ensuer I dont get taxed on that too?

AGoodman
Posts: 881
Joined: Fri May 16, 2014 3:47 pm

Re: CTG on ex marital home when splitting profits with wife / ex wife

Postby AGoodman » Fri Apr 06, 2018 5:19 pm

There are probably a few ways of looking at this but none of them will allow you to automatically split the gain with your wife. The property is yours so the gain is yours.
On the plus side, if you have held the property for 77 months in total (6.5 years) you might be able to escape CGT entirely using PPR and your annual exemption.

Essentially, this would mean you had lived there for 41 months (3.5 years) and then you get 18 months "free" - a total of 59 months. You would get PPR of 59/77 (=76.6%) of the gain (77% of £50k).

The remaining taxable gain would be £11,680, which just squeezes under your £11,700 annual CGT exemption.

The position will slowly get worse over time as your period of non-residence increases.

If you are left with a big gain you could transfer 60% of the property to your wife, which should avoid any tax on a later sale (your wife takes 60% of the gain but benefits from 100% PPR). This requires a written agreement (or Court order) to transfer the interest as part of the divorce and you would need to make an election to HMRC under s.225B TCGA.

wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: CTG on ex marital home when splitting profits with wife / ex wife

Postby wamstax » Fri Apr 06, 2018 5:23 pm

You’ve got a bit of a problem as the house is 100% yours and therefore the chargeable gain will be 100% yours as things stand at the present moment. Additionally however as you have presumably lived in it at some point as your main residence ( thereby entitling you to Main Residence Relef -MRR) you might qualify for enough MRR to bring any gain below the annual CGT exemption allowance of 11,700.

If the gain was £50k then you would have to have lived in the property for around 78% of the time you actually owned it including the last 18 months which also qualifies automatically for MRR if the property was your only main residence at some time
regards and hope this helps
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wamstax
Posts: 1869
Joined: Wed Aug 06, 2008 3:39 pm
Location: Operate Nationally but based in Aberdeen
Contact:

Re: CTG on ex marital home when splitting profits with wife / ex wife

Postby wamstax » Fri Apr 06, 2018 5:28 pm

Sorry posted at same time but after Good....
no disagreement here then
regards and hope this helps
http://www.wamstaxltd.com
Operates Nationally with competitive costs
and email and phone contact can be obtained from website

maths
Posts: 7593
Joined: Wed Aug 06, 2008 3:25 pm

Re: CTG on ex marital home when splitting profits with wife / ex wife

Postby maths » Fri Apr 06, 2018 5:59 pm

You and your wife are separated and thus for CGT purposes any inter-spouse transfer would be at market value.

Thus, if you transferred 60% of your interest to wife a CGT charge would arise on your part on the 60% (ie 30k) less any reliefs as mentioned by AGoodman. The wife would have no CGT charge as and when she sold her 60% as she would qualify for private residence relief.

On the sale by you of your retained 40% you would also have a CGT charge but again subject to any reliefs.

To avoid the charge on your part on the 60% it would be necessary for it to be part of the divorce arrangements in which case on the transfer of the 60% no CGT charge would arise on your part assuming that since you left the wife has remained in the property and you have not formally elected for another property as your main residence since you left the former matrimonial home. As AG comments you would also need to make an appropriate claim.


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