Capital Gain on Property

Capital Gain on Property

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Hello

I would be grateful if you could help me with this.

A client Mrs A owns a rental property on her own since 2001. When she comes to sell it she will be liable for any gains less her Capital Gains allowance.

If 6 months prior to selling the property she transfers 50% of it to her husband Mr A and then they sell it, are they able to split the entire gain since 2001 equally, or can Mr A only have 50% of the gain during the period of his ownership, being 6 months?

Any advice would be gratefully received.

Thanks

Replies (12)

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Portia profile image
By Portia Nina Levin
07th Nov 2014 14:03

Did Mrs A ever occupy the property as her PPR

If not, your plan works broadly as stated.

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By saima wahid
07th Nov 2014 14:52

Thanks for that, no she didn't, what happens if she did?

Cheers

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Portia profile image
By Portia Nina Levin
07th Nov 2014 14:59

If she qualified for PPR

And then transferred half to hubby (when it was not their PPR), PPR would be lost on hubby's half on disposal.

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By King_Maker
07th Nov 2014 15:31

Yes, such a maneouvre is effective for CGT.

This assumes that the wife is happy for the husband to keep 50% of the proceeds.

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By saima wahid
07th Nov 2014 15:49

Many thanks for your answers, this really is a great site.

As a final thought, what happen if 50% of the property was transferred not for 6 month but for say a week before completion. Would HMRC allow this?

Thanks again

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By King_Maker
07th Nov 2014 15:57

A week before Completion may be too late, if contracts have already been exchanged.

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Portia profile image
By Portia Nina Levin
07th Nov 2014 15:58

Yes

The point is that when W transfers to W it is deemed transferred for a consideration that gives rise to neither a gain nor a loss. W disposes of it for that consideration and H acquires it at that base cost.

So when W transfers her half to H she has made a disposal, but there is no gain, because the consideration is deemed to effectively be equal to her base cost.

On week later when H disposes of it his base cost is the amount that it was deemed transferred at, W's original base cost.

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By saima wahid
07th Nov 2014 16:15

Thanks, you have all been brilliant as usual.

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By dropoutguy
08th Nov 2014 17:38

IMO

it is sensible to have the gift and sale in different tax years if possible

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Replying to Zuril:
By Paul D Utherone
10th Nov 2014 22:26

Any particular reason ...

dropoutguy wrote:

it is sensible to have the gift and sale in different tax years if possible

... other than proving the gift was effective in good time (ie mot post excange)?
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By The Grammar Police
08th Nov 2014 21:35

I assume

that neither party is a Member of Parliament. (Daily Mail reader!)

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By dropoutguy
10th Nov 2014 23:26

Ramsey

To make it less likely that it will be identified as a transaction undertaken for tax reasons, if indeed the facts allow such an argument ( which they might if a client gets a bit too cute )

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