Transfer equity cgt and ppr

Transfer equity cgt and ppr

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Hi
I wondered whether someone could advise on best way forward for adding myself to husbands other property. The property was bought in 1999 for £60k now worth £140k we both lived there (unmarried at the time) for 2 years and then moved out and it has been let since. My husband is higher rate tax payer so we wanted to benefit from tax relief by putting flat into joint names. We are now married so no cgt but what impact would this have on selling in the future as I understand I won't have any ppr as I was not married when I was living there? If we put in joint names now can we change the % before selling so husband can still get ppr on a significant proportion of the gain.
Any advise much appreciated
Thanks

Replies (9)

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By v k ratliff
27th Jun 2012 17:48

The reason  you wouldn't get

The reason  you wouldn't get ppr on the now let property is because you had no ownership interest in it when you were living there, not because you weren't married to the owner then.

When the property is sold, your husband will only get ppr on a time apportionment of the total period of his ownership - ie 2 ( + 3) years out of what is now 13 years since 1999 . The extra 3 years is a statutory entitlement that applies "in any event".

Also, his gain would only be chargeable to the extent that it exceeded the lower of the non-taxable apportioned gain (ie 5/13ths) and £40,000 - another statutory relief - and his annual exempt amount of £10,600.

All of your gain based on original cost would be chargeable, subject to your annual exempt amount.

Depending on how the numbers work out it might or might not be  worth the hassle of flipping ownwership back and forth.

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Replying to tracymair:
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By Pennycroft
27th Jun 2012 19:32

Thanks that's great.
So just to check my husband could have 3 elements to offset:
1) ppr
2) lower of ppr or £40k
3) annual cgt allowance (assuming not already used elsewhere)

Is this right?
Thanks for your help

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By mackthefork
28th Jun 2012 00:00

At the moment..

Assuming the 5/13th is right your husband would have

Gain 80k

PPR 30.75k

Letting Rel 30.75k

Annual Allow 10.6k

Taxable gain 7.9k taxable at 28%

=£2,212 CGT

There are probably some allowable costs and will be selling cost which can come off this as well.  I can see the main problem is probably with the taxation of rents, but a transfer might have undesired effects, I would suggest you speak to an expert in possession of the full facts before proceeding.

Regards

MtF

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By v k ratliff
28th Jun 2012 07:53

.

Also worth making clear that any wife's gain for the period after she becomes part-owner would qualify for ppr relief calculated as the increase in market value over that period.

Quite a complex situation!.

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Replying to Euan MacLennan:
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By Paula Sparrow
28th Jun 2012 09:42

V K

v k ratliff wrote:

.

Also worth making clear that any wife's gain for the period after she becomes part-owner would qualify for ppr relief calculated as the increase in market value over that period.

Quite a complex situation!.

How does the wife qualify for PPR if she has not actually lived in the property at any time during which she has been a legal owner?

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By TaxationPete
28th Jun 2012 08:58

What you require is face to face advice on the use of a Declaration of Trust to apportion the benefical interest in the property say 99 to 1. This would place the rental income in your name whilst the legal ownership remains with your husband. Prior to any marketing of the property vary the DofT transferring a large proportion of the property back to H who would attract PPR and LR on that portion. W should retain enough benefical ownership that W can use up her Capital Gains Allowance. You will need to run the numbers nearer the time being aware that W portion does not attract PPR or LR. Do not mess with DIT DofT use a well versed solicitor. Regards Peter

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By TaxationPete
28th Jun 2012 09:52

I concur VK is incorrect in his assumption. Regards Peter

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By v k ratliff
28th Jun 2012 16:22

Apologies

Don't know how but I somehow got it into my head that the couple subsequently lived in the rented property.

That's the sort of mistake you make if you try post commetns before finishing your first cup of coffee in the morning.

Sorry!

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By Pennycroft
28th Jun 2012 18:10

Thanks for all your comments - much appreciated glad I did not just go ahead with the transfer!

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