I have a client whose property was her main residence from purchase on 12./8/89 at £85,638 until marriage in December 1992, since when it has been let. She is unlikely to be able to exchange before 5/4/08. How does she protect both indexation and PPR exemption and lettings relief ?
As far as I can tell, transferring to her husband now would protect indexation of .398 ie £34,083, but surely he would not then be able to claim PPR and lettings reliefs, which is of course extremely valuable, and more than indexation . Also would SDLT be payable on the transfer anyway ?
Current estimated net proceeds of sale would be around £292,950.
Jack Maunders
Replies (3)
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Transfer to son or daughter?
If there are children, a transfer to son or daughter would be at market value for CGT & son or daughter would acquire at same market value. Presumably indexation, taper, PPR & lettings relief would still apply to parents disposal?
Presumably no Stamp Duty as no consideration passes (if mortgage free).
CGT payable by parents 31 Jan 2009.
And if son sells after 5/4/08, his cost is the market value at transfer, so not much of a gain or loss on his sale if the market value figure used was fairly accurate.
Any IHT problems though? And if son passes back some proceeds to parents, could HMRC attack whole transaction anyway?
Good Call
Enter Take 3 in the seach window on this site read then follow the link to the HMRC FAQ pages.
It is very important to remember that transferring the property even by Interspousal transfer looses not only the PPR relief but Lettings relief also dies as the husband has not lived in the property as an owner. SDLT would not apply as this would be a no loss no gain interspousal transfer.
If she sold it now and she had an taxable income of £25000
Capital Gains Summary
Purchase Price £85,638 12/08/1989
Indexation 0.404 £120,236
Legal Fees £0
Sale Price £292,950 14/03/2008
Enhancements £0
Legal Fees £0
Gross Gain £172,714
PPR Relief £58,862 £113,852
Letting Relief £40,000 £73,852
Taper Relief 40% £44,311
CG Allow'ce 1 £9,200 £35,111
CG Bill £11,079
If next month :
Capital Gains Summary
Purchase Price £85,638 12/08/1989
Indexation 0.404 £85,638
Legal Fees £0
Sale Price £292,950 14/04/2008
Enhancements £0
Legal Fees £0
Gross Gain £207,312
PPR Relief £70,338 £136,974
Letting Relief £40,000 £96,974
Taper Relief 0% £96,974
CG Allow'ce 1 £9,600 £87,374
CG Bill £15,727
If Husband owned and sold it :
Capital Gains Summary
Purchase Price £85,638 12/08/1989
Indexation 0.000 £85,638
Legal Fees £0
Sale Price £292,950 14/04/2008
Enhancements £0
Legal Fees £0
Gross Gain £207,312
PPR Relief £0 £207,312
Letting Relief £0 £207,312
Taper Relief 0% £207,312
CG Allow'ce 1 £9,600 £197,712
CG Bill £35,588
HMRC are in fact saying that that they will not strip out indexation on the sale of a property that attracted it.
Note that this owner has topped out on Letting Relief so the CG laibility is accruing faster now. The owner should consider adding the other spouse just before the sale to use both CG allownances.
Regards Peter