CGT on sale of matrimonial property

CGT on sale of matrimonial property

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A new client has recently come to me with concerns over CGT liability with regard to the sale of his ex-matrimonial home.

H + W purchased the matrimonial home in 1985 and in 2005 they were separated and he moved out.  In 2007 they divorced and the Court ruled that the husband transfer to the ex-wife his legal and beneficial interest in the property on the condition that the property was charged with a legal charge as security for a lump sum payment of 20% of the sale proceeds, which may be triggered at some future date by one of the following events:

1) the youngest attains 18, or

2) the death of the wife, or

3) remarriage or co-habitation of the wife.

For information, at the time of the divorce the said property is valued at c. £400,000.

As child becomes 18, in August 2014, the wife sells the property for £700,000 and H receives £140,000 net sale proceeds.

Having read around my understanding is that the arrangement is deemed as a Mersher order but I would appreciate a steer as to the CGT ramification of the proceeds of sale.

Any help greatly appreciated, thanks for reading.

Replies (4)

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By markmorley
23rd Mar 2015 18:55

mesher order

My understanding is that the owners and in your case the husband should be entitled to ppr relief 

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By johngroganjga
23rd Mar 2015 23:47

The above is correct provided that the wife continued to occupy the property until it was sold, and provided that the husband had not acquired another PPR in the meantime.

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By gbolton
24th Mar 2015 09:44

PPR
Having lived in rented property for several years I believe that H purchased residential property for himself and new partner in 2012.

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Replying to litebluelog:
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By LyneT
24th Mar 2015 10:21

Where the husband lives is not relevant for Mesher/Martin orders.

Effectively, these orders put the property into a trust.  Provided a beneficiary of the trust (generally the wife) lives in the property, then PPR relief is due (Sampson v Peay)

It doesn't matter that the husband lives in another property and has a PPR himself because the property in the trust is occupied by one of the beneficiaries,  It does not have to be occupied by all of the beneficiaries.
 

So provided the wife does not have another PPR the trust property will qualify. 

 

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