PPR and lettings relief

PPR and lettings relief

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Miss X and Mr Y lived in a flat owned by Miss X. Whilst living in the flat they married but did not legally transfer the property into joint names. After marrying, they moved into a house and let the flat out. The flat has been let out for 3 years. If the flat is transferred into joint names now:

  • Will lettings relief be available for both parties (£80k) or only for Miss X (now Mrs Y) ie, £40k?
  • Will both Mrs Y and Mr Y be able to use their CGT allowance against any gain when the property is sold? or will this be restricted to Mrs Y?
  • Is it OK to own the property 99/1 or does this need to be 50/50?
  • As the transfer into joint names has not yet been made, is there a better way of doing this?

Thanks

Replies (5)

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By Cathy R
15th Oct 2015 11:07

If the flat is transferred into joint names now, Mr Y will not be entitled to PPR or letting relief, as the property has not been his PPR during his period of ownership.  he will be entitled to his annual exemption.

You will need to run the figures for both scenarios but it could well be that a higher tax liability will arise if the property is in joint names.

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By TaxationPete
15th Oct 2015 11:21

Also be a ware that if you went 99/1 then the 1% profit would not use up you CGT Allowance.

Regards Peter

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Replying to Matrix:
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By Sarah555
29th Oct 2015 13:33

Thanks - so if the property was owned 99/1 and there was a £20,000 gain would the gain be split £19,800/£200 ie,you would only be able to use £200 of his CGT allowance?

Also, what if they both moved back in now and made it their PPR and then did the transfer into his name? Would he be able to get full lettings relief of £40k? Would this also relate to past periods or only future periods?

 

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By cohen
15th Oct 2015 19:01

Hi

A spouse picks up the other's ownership period for PRR purposes, only where the property is their main residence at the time of the transfer, so a transfer into joint names when it's not their PPR won't be effective for this purpose. As mentioned above, you'll have to run the numbers to see if the transferring spouse's loss of PRR & LR on the half transferred is outweighed by the transferee's annual exemption/any losses/ lower tax rate, and a suitable split to maximise these reliefs/allowances.

http://www.hmrc.gov.uk/manuals/cgmanual/CG64950.htm

 

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By cohen
15th Oct 2015 19:01

Yep.

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