Transfers between spouses

Transfers between spouses

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I am dealing with CGT computations for several properties where a part interest was transferred from wife to husband in 2002. Eventual sales to third parties were in 2005/2006 and 2006/2007. I assume that the principle of no gain / no loss means that the husband effectively takes benefit from Indexation and Principal Private Residence relief (wife lived in some of the properties for some of the time) available to the wife in her period of sole ownership but would appreciate confirmation if this is correct.
Once the husband has taken on a base cost that gives the wife no gain / no loss what are their relevant acquisition dates for taper relief purposes? Does the wife taper from her original acquisition date and the husband from the date he received his part share from the wife?

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By gbuckell
04th Aug 2009 18:28

Good news and bad
Taper relief rules for inter-spouse transfers are governed by TCGA 1992 Sch A1 Para 15. The deemed acqusiiton date on the subsequent disposal is the date the first spouse acquired it (see para 15(2)). The rules for determining whether business or non business relief is available (other than for shares) also bring the transferring spouse's history into account.

The bad news relates to the principal private residence rules. If only one spouse has used a property as his PPR (e.g. prior to marriage) and then transfers a share in it to the other spouse after it has ceased to be used as a PPR, then the second spouse cannot claim any PPR relief on the subsequent disposal.

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By CrowtherP
05th Aug 2009 12:56

if the wife lived in before marriage
If the wife lived in the property, before marriage [As her own PPR] the years that she lived in count for the husband too, even though they are pre-marriage. This is so even though he may not have known her at that time. Section 222 (7).

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By gbuckell
05th Aug 2009 13:18

Look carefully at s222(7)(a)
S222(7)(a) requires that the property be their only or main residence at the time of the transfer. The phrase in the legislation is "which is their only or main residence". Note the "is".

This is also the view of HMRC. See http://www.hmrc.gov.uk/manuals/cg4manual/cg64950.htm

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By CrowtherP
06th Aug 2009 12:00

Just because the HMRC says
I do not necessarily agree. The house or apartment is their main residence if it was their residence at some time [222(1)(b)] and they still own it. Thus they may possess more than one main residence, at any time, [because they have not sold one or two properties yet] even though only one is their current main residence.

It may not be their main residence at the very time of the gift. 222(7) expressly deals with the amount of CGT relief due under section 223. Section 223 expressly deals with all sorts of absences, and situations where the residence is no longer the current main residence.

I do not necessarily agree that this narrow construction of 222(7) is correct. By definition one is often dealing with a property that is not the current residence under section 222.

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By gbuckell
06th Aug 2009 13:15

You may be right
... but it would be a brave person (preferably also with a deep pocket) to go against a view expressed in HMRC's manuals.

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By Moo
06th Aug 2009 13:51

Many thanks
All your comments have been really helpful. Fortunately it does appear that they were both living in the property when Mrs transferred a portion to Mr so I don't need to challenge the Revenue view on that point.

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