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Where Taxpayers and Advisers Meet

CGT and PRR on sale of Property

George drake
Posts: 4
Joined: Sat May 19, 2012 8:59 am

CGT and PRR on sale of Property

Postby George drake » Fri Jul 12, 2019 9:54 pm

Hi
My husband and I owed and lived in property 1 for 10 years before buying and moving to property 2. Property 1 was let out when we moved to property 1 and a declaration of trust and form 17 filed with HMRC allocating 1% to me and 99% to my husband. We have paid income tax for about 5 years on that basis. We are now considering selling property 1 (late 2020).

I have noted that letting relief is no longer to apply from April 2020 and that the 18 month automatic period added to the end of PRR is to be reduced to 9 months from this date also.

We are considering transferring property 1 back to more equal shares before the sale primarily this enabling us to both use our capital gain tax allowances. I understand this is acceptable?

However, I am unsure as to how we would apply the PRR and calculate the gain bearing in mind the fact that whilst we have both owned property 1 (legally and beneficially) during the entire period, the percentage share has changed. For example, if I am transferred back say 49% (so I own 50%) do I use that percentage to work out the gain? I was deemed to own 50% when we bought property 1 and I will own 50 % when we sell property 1? Of course I have not owned 50% for the entire period. Likewise, do I currently (Pre April 2020) qualify for the PRR and the Lettings Relief having only owned 1% for most of the letting period (and if so on what gain)?

Any guidance gratefully received!

darthblingbling
Posts: 281
Joined: Wed Aug 02, 2017 9:09 pm

Re: CGT and PRR on sale of Property

Postby darthblingbling » Fri Jul 12, 2019 9:58 pm

It was your main residence for 10 years, you'll both get 10 years PPR. Plus the deemed residence of 9 or 18 months at the end depending on when you sell

George drake
Posts: 4
Joined: Sat May 19, 2012 8:59 am

Re: CGT and PRR on sale of Property

Postby George drake » Fri Jul 12, 2019 10:06 pm

Thank you.

I am just not sure what the acquisition and disposal figures will be?

Let’s say:

1. we bought for £150k in equal shares
2 I transferred 48% leaving me with 1% when we started letting.
3. I am transferred back the 48% when we are ready to sell.
4. We dispose at £250k and hold equal shares.

Do we effectively ignore what happened at 2 and 3?!

AdamS93
Posts: 238
Joined: Tue Sep 26, 2017 6:28 pm

Re: CGT and PRR on sale of Property

Postby AdamS93 » Sat Jul 13, 2019 8:39 am

Thank you.

I am just not sure what the acquisition and disposal figures will be?

Let’s say:

1. we bought for £150k in equal shares
2 I transferred 48% leaving me with 1% when we started letting.
3. I am transferred back the 48% when we are ready to sell.
4. We dispose at £250k and hold equal shares.

Do we effectively ignore what happened at 2 and 3?!
Nope. There are some really obscure rules when it comes to PPR and inter-spouse transfers of properties that are not your PPR at the time of transfer. By the sounds of it you may have lost your entitlement for PPR unfortunately depending on when the transfer was completed. The amount of tax that is at stake it fairly large and therefore I would advise you to seek professional advice. Any fees will probably be repaid many times over by the amount of tax saved.

George drake
Posts: 4
Joined: Sat May 19, 2012 8:59 am

Re: CGT and PRR on sale of Property

Postby George drake » Sat Jul 13, 2019 11:47 am

Thank you for your input. I believe that GT for spouses is dictated by the rules found in TCGA 1992 s58 which means that the 49% interest transferred goes across at cost. S222(7) is also relevant. Had property 1 been owned 100% by me then s222(7) would mean that on transfer half the relief would be lost. However, as I havr held a minimum of 1% throughout s222(7) seems to mean that the period of ownership goes back to the beginning and PPR is available.

Any thoughts?


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