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Where Taxpayers and Advisers Meet

Using spouse's allowance on sale of property

andy13
Posts:4
Joined:Fri Mar 04, 2022 2:13 pm
Using spouse's allowance on sale of property

Postby andy13 » Fri Mar 04, 2022 3:22 pm

My sister & I inherited a property 20 years ago, it was in our joint names. It's been let out ever since so neither of us have lived there. We have just completed selling the property so I'm trying to work out my CGT.

For CGT, can I split my 50% of the gain between my wife and myself so we each declare a gain of 25%? That way we'd get to use both of our allowances. We have been declaring the rental income as equally split between us, so it seems reasonable to me to consider the capital gain the same way.

Thanks for any advice.
Andy

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Using spouse's allowance on sale of property

Postby pawncob » Sat Mar 05, 2022 10:01 am

On what basis did you split the income with your wife? You can't just allocate income to your best advantage.
Your wife didn't own any part of the property, so she has nothing to sell, and no gain.
With a pinch of salt take what I say, but don't exceed your RDA

andy13
Posts:4
Joined:Fri Mar 04, 2022 2:13 pm

Re: Using spouse's allowance on sale of property

Postby andy13 » Sat Mar 05, 2022 12:00 pm

Well, as far as I'm concerned, as we're married then all our assets are jointly owned, so she owned it with me. However, as only my name would have been on the title to the property, perhaps that's not enough?
Perhaps I should have done some sort of formal transfer of part ownership before the sale? I guess that can't be done retrospectively?

Also, the proceeds to the sale are shared between us, and were paid into a joint account. The solicitor handling the sale for us actually wrote to us to say that by paying the monies into that account, I would be deemed to be gifting half the proceeds to my wife, so I would need to consider the tax implications of that. As far as I'm aware, gifts between spouses aren't subject to any taxes, so I didn't really understand why the solicitor made that point.

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Using spouse's allowance on sale of property

Postby pawncob » Sat Mar 05, 2022 1:33 pm

If you made a statutory declaration that all assets were to be considered joint, prior to the sale, then that might count for something, but that wouldn't cover land.
Did you submit Form 17 to HMRC (which would support your case)?
I suspect an HMRC investigation would result in penalties for mis-declaring the income.
With a pinch of salt take what I say, but don't exceed your RDA

iwmtaxadvisor
Posts:45
Joined:Wed Sep 09, 2020 5:12 pm
Contact:

Re: Using spouse's allowance on sale of property

Postby iwmtaxadvisor » Sat Mar 05, 2022 3:40 pm

Question as asked: I think advisers will take different views. What you have to do is take a line and then make sure you can defend it. We just analysed a position like this for a French couple where the title of the UK property was just in his name. After asking and considering the law, there was sufficient evidence available to support the view that their house was bought out of marital funds, so there was reason to say the capital gains could be split between them - even though to that point she had been taking all the income (and doing all the work). I have to say though it took us a month to convince ourselves there was a good case. In your case, since you say the funds were inherited, you will have to show that your share of the inheritance became co-mingled. So, look for any direct contribution of capital from your wife , or any agreement relating to other assets that impacts and shows you were regarding it as a 'joint' asset. Actually you don't need to show 'joint' just an interest. Failing such evidence, my view is that it's just your gain (split with your sister).
The transfer of funds as your solicitor refers to is a gift of cash, not a transfer of the property.
Idea: Rather clutching at straws... you do want to consider if you or your sister ever stayed long enough in that property for it to become a primary residence. Failing that, normally one is looking at delaying income if you can for the relevant tax year to take your rate down (one thing you can do with drawdown), but in your case it has pretty much happened. Sorry, not much joy in this answer.
Robert Warren
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andy13
Posts:4
Joined:Fri Mar 04, 2022 2:13 pm

Re: Using spouse's allowance on sale of property

Postby andy13 » Sat Mar 05, 2022 7:57 pm

Interesting. I must say I'm surprised this isn't more clear-cut - I really expected this to be a common situation.
I'm thinking it's now too late to do anything to make sure my wife's interest in the property is sufficient to use her allowance. Pity, as that would have saved us quite a tidy sum.

Many thanks for the detailed answers.
Andy

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

Re: Using spouse's allowance on sale of property

Postby maths » Sun Mar 06, 2022 11:55 pm

Thed situation is isn principle common. However, typically it's a property owned only by husband and wife.

Clearly, following the inheritance, the interest in the property was owned beneficially 50% you and 50% sister. At that point your wife owned nothing.

Unless, you took explicit steps thereafter to transfer a % of your 50% to your wife then she continues to possess no beneficial interest. On a sale only you would be exposed to a CGT charge on any gain attributable to your 50% beneficial interest.

If, however, you had transferred a % of your 50% to your wife (prior to sale) then on a sale you would each by subject to CGT on your exact % (eg 40/10). You could then each have used your CGT annual exempt amount to mitigate the total CGT charge (plus the CGT tax rate for each of you may well also have helped mitigate the overall CGT charge).

It is of course not possible to change affairs once the sale has occurred.

Rental income is yours unless you transferred (as above) a % of your 50% to her. Form 17 has no relevance to your circumstances.

andy13
Posts:4
Joined:Fri Mar 04, 2022 2:13 pm

Re: Using spouse's allowance on sale of property

Postby andy13 » Tue Mar 08, 2022 12:52 am

Indeed - as I said earlier, I fear it's too late to do anything about it now. I should have thought about it before completing the sale.
Rather naively, I guess, I'd have thought that a married couple somehow default to owning assets jointly, unless something is done to explicitly change that. But it appears that exactly the opposite is true.
So it won't be any help to us now, but in case someone else should be researching this issue in future, what would be the process to transfer part of the ownership?

Thanks all.
Andy


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