Main residence relief - husband and wife scanarios

Main residence relief - husband and wife scanarios

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Does anyone know if there is anything to spoil the scenario below?

Husband (high earner) owns a flat which he bought in 2010.  Marries a woman (low/no earner) and the rent out the flat and move to another house.  He pays tax @ 45% on rental profit.  She would pay no or virtually no income tax so they transfer the flat into her name.  So far so good.  However, they sell the flat 10 years later and there has been a significant increase in value since original acquisition in 2010.  She will have lived in the flat during her period of ownership for only a couple of months so if she sells the flat nearly all the gain will be taxable because there will be very little main residence relief.  If she transfers the property back to the husband when the rental is over, and they live in it for a few months as their main residence, and then he sells it, is the gain all tax free on the basis that he has lived in it as his main residence during his entire period of ownership (ie since she transferred it back to him)?

Thanks for any observations.

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By User deleted
01st May 2015 18:52

I've had enough of PPR and spouses for now

I suggest that you go and read TCGA 1992 s222(7).

You could have a look at this thread as well, though it may leave you no clearer.

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By cohen
01st May 2015 21:10

Hi

My first thought was that If the wife were to transfer the property to the husband while it's their main residence, then he acquires her entire period of ownership. If she were to transfer it before they begin occupying it again, then his ownership period begins from the transfer.

But, looking more closely at s222(7), http://www.legislation.gov.uk/ukpga/1992/12/section/222/enacted , "...where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies..." suggests that as the first transfer was on a no gain/no loss basis, he will effectively be getting the property at his original base cost when first purchased, and that this will mean that the ownership period will stretch back to that original purchase.

I should also mention quality of occupation, intention etc - simply moving back in for a couple of months to try to get PPR before selling is unlikely to be sufficient to justify a claim if HMRC choose to start looking at the case.

 

 

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By odysseyats
05th May 2015 10:27

Thanks both

BKD I can understand, having read the other string, why you might have had enough.   

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