My friend lived in a flat, and kept it, and rented it out when he went to live with his partner and has rented it out ever since (15 years). It has gone up in value by £150,000 and he now wants to give a half share to his partner, who he isn't married to. Would he have to pay capital gains tax even though no money has changed hands ?
Replies (6)
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Bargain not at arm's length
Hi there,
Yes I am afraid that gifting an asset to another person (unless it is of business assets - that do not include letting properties) gives rise to a chargeable occasion and unfortunately a potential capital gain based on the market value of the property at the date of disposal less the original cost of the 50% gifted.
However a word of caution here please - as your friend lived in the flat he would be entitled to main residence relief on his disposal of the property and also what is called lettings relief whereas if he gifts 50% to the partner she would not be entitled to either main residence relief or lettings relief if she never lived in it as her main residence.
His seeming generosity might also put extra bawbees into the exchequer's coffers if and when the property is ultimately sold.
I hope that this helps but inevitably it could all come down to number crunching and when the ultimate disposal is known so your friend would be best seeking professional advice where all the facts and figures and documents can be explored before taking such a step
regards
@Phil Rees
Yes, but it may be worth gifting her half the house so that he does not have to marry her!
the price of love
But if he marries her she still won't get MRR or LR
Or did I miss the tongue in the cheek