Arms' length transaction or not ? | AccountingWEB

Arms' length transaction or not ?

I have a strange little potential CGT problem:

Client bought house jointly with partner in 2001 for £55k

They split up in 2004, client moved out & bought another house of his own, but they remained on good terms

He has agreed to sell his half of the house (now worth around £125k) to his ex partner for £27.5k, half the original cost

Clearly PPR relief will apply to the first 3 years plus the 'deemed' 3 extra years, but is the disposal value for CGT going to be £27.5k or £62.5k ?  

And does the fact that the ex live there mean that she is effectively a tenant, and will reduce the present day value ?

Comments gratefully received, thanks.

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