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Where Taxpayers and Advisers Meet

Avoiding Tax on rental income by selling to wife

oaktree
Posts:1
Joined:Sat Mar 16, 2013 11:14 am
Avoiding Tax on rental income by selling to wife

Postby oaktree » Sat Mar 16, 2013 11:37 am

Until October 2012 I was the sole owner of a house (house A) I paid £80K in 1996. I have inherited another house which is now my main residence, I have informed HMRC.

I have been unable to sell house A (valued at £210K) , so intend to Let. However the tax on the income for me is very high (effectively 60% as I will lose 3x child benefit).

My wife is not a tax payer.

I am wondering if I can sell house A to my wife for £210K, so she can become the landlord , hence avoid rental income tax. I think SDLT would be £2100.

My theory is that by selling I will not pay any tax as my PPR should apply.

I think that if / when my wife sells in the future then she would be liable for CGT if she sold for £220K plus, but think that this is preferable.

I would appreciate if anyone could confirm that my understanding is correct. I wasnt quite sure that as she is my wife if my PPR would be at risk.

section 44
Posts:4467
Joined:Thu Oct 30, 2008 12:47 pm

Re: Avoiding Tax on rental income by selling to wife

Postby section 44 » Sun Mar 17, 2013 1:37 am

Broadly you are correct.

mullet
Posts:3242
Joined:Fri Nov 06, 2009 9:26 am

Re: Avoiding Tax on rental income by selling to wife

Postby mullet » Sun Mar 17, 2013 1:54 pm

I think that if / when my wife sells in the future then she would be liable for CGT if she sold for £220K plus, but think that this is preferable.
No - there is a fly in the ointment. Legislation states that you will be deemed to dispose of the asset to your wife for an amount of consideration that produces neither gain nor loss. In simple terms, this means your base cost plus any acquisition costs plus any disposal costs. Imagine that this figure is £85K. You make a disposal at £85K, less £85K qualifying expenditure gives a gain of nil. Any your wife will acquire at £85K and will therefore be exposed to CGT on her ultimate disposal.


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