CGT / PRR when Seperating

[SuziP]

In 2005 I purchased a home with my husband with joint ownership, in 2022 we purchased an addition second Home with joint ownership which I have been living in.

We are now considering an amicable judicial separation and have agreed that he will keep the first home transferred into his own name and I will keep the second home transferred into my own name, as we understand it these transfers would presently be classed as no gain / no loss for CGT.

We still have a few weeks to declare a main residence but we don't know how this decision may impact capital gains tax / primary residence relief if either of us decides to sell their individual home after the separation and transfer of properties into their own names?

[AGoodman]

As you know, you will have the original acquisition value of the whole property.

In the absence of an election, your main residence is just your de facto main residence. A married couple can only have one PPR while they are living together but you can have different PPRs once you are living apart.

So, if the first home was your de facto main home while you lived together, the second home would qualify for PPR (for you) from the date you ceased living together and it became your main home.

It sounds as though your husband will qualify for 100% PPR over the original property.

You may not need to make an election if property 2 became your main home on the day you ceased to live together (at property 1). It would just confirm it and put it beyond doubt.

[SuziP]

Thank you for your response and your comments.

Yes the first home would be the main residence and I am willing to accept that my husband would qualify for 100% PRR on any future sale after separation and transfer into his name.

What I would like to acertain would be any CGT liability on any future sale after separation and transfer into my name of the second home?

If the second home would become my main home and would qualify for PRR for me from the date of separation and transfer, would that mean that I would also qualify for 100% PRR on any future sale after this point in time?

Or would I find myself personally liable for CGT between the original second home purchase price and the future sale price but in some way proportionally calculated taking into account the second home original purchase date / the date of separation when it became my main home with PRR / and the date of sale?

[AGoodman]

Can you explain when you moved into the second property and when you ceased living together. it isn't clear from your original posting if they were the same time or not.

[maths]

For ease of discussion it doesn't seem unreasonable to assume you and your husband ceased living together the day you moved full-time into property 2.

1. If property 1 and property 2 were each occupied as residences by both of you until the date you moved full-time into property 2 then an election needs to be made covering the period to when you moved out of property 1.

2. You have three years after separation to each transfer your 50% interest in each of the two properties at no gain/no less for CGT.

3. Once you have acquired a 50% interest in property 2 from the husband giving you a 100% interest in property 2 then on any future sale of property 2 private residence relief will apply only for the period from the date you moved into it on separation to the date of sale. No relief is available for the period starting from the date of acquisition of the 50% in property 2 to the date you moved in.