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Capital Gains involving two husbands

Not bigamy! Involves two separate husbands

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I am struggling with a CGT calculation for a client. As Clint Eastwood's Dirty Harry said "a man's got to know his limitations". I am happy to pay for advice if needed or donate to a charity.

The position is as follows:-

Property was bought by client and her first husband in 1987 (exact month not known) for £27,500 and the client's main residence with her first husband

They divorced in 1996 and the client paid her first husband £8000 as part of the divorce settlement so the property was then transferred into her sole name

She then met a new man, now her husband, and he became co-owner (50/50) in 1998

They moved out from it in 2004 and it was let from that date.

It has now sold for £205000 and there were estate agent fees of £3075 and solicitor fees of £887

Due to the change in ownership I am struggling with cost values and dates for claiming PRR.

 

Replies (11)

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By Matrix
25th Sep 2021 23:43

Were they married in 1998 when the transfer was made?

I think her PPR period is from 1987 to 2004, his is 1998 to 2004 (plus last 9 months), but they are both treated as owning their respective 50% share since 1987 if a NGNL transfer was made in 1998. If they weren’t married then his ownership only starts in 1998 but I think you would need a valuation then.

I will no doubt be told I have made lots of assumptions so obviously feel free to go back to the legislation or pay someone to do so since I have not done so.

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Replying to Matrix:
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By AdamMurphy
25th Sep 2021 23:58

Thanks for this, I need to check when she re-married.

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Replying to AdamMurphy:
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By Matrix
26th Sep 2021 08:06

Also check whether the transfer on divorce was NGNL, if not then that 50% would be rebased.

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By atleastisoundknowledgable...
26th Sep 2021 06:30

Presumably you’ll need to know MV in 1998?

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By Tax Dragon
26th Sep 2021 08:59

What are you/your commentators/ALISK making of the acquisition in 1996? To me, £8,000 seems less than the value of a 50% share at that time.

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Replying to Tax Dragon:
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By Paul Crowley
26th Sep 2021 12:20

The £8,000 is probably irrelevant as taking account of other matrimonial issues, or even just the mortgage at the time.
Improvements may also be a consideration.
The direct question was PPR and cost.
Easy for wife, but marriage date relevant for husband on both issues is how I see it.

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By AdamMurphy
26th Sep 2021 13:14

Ok, have got confirmation, she remarried in 1997, in-between the divorce and the second partner becoming co-ownder

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Replying to AdamMurphy:
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By Paul Crowley
26th Sep 2021 18:11

I will have a stab
This a story (or a game) of two Halves, that then get halved.
Wife bought half a house at cost, PPR applies onwards
Wife bought the other half at a value to be determined. I would warn client that this bit is difficult as market value is difficult. But let's say a value can be determined, and that half gets PPR

Then she transfers half on the total to husband. PPR on his share.
PPR stops 9 months after letting starts

Values for cost each are half of the first half and half of the second half

I still think first transfer is key
Was it in the tax year of seperation?

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Replying to Paul Crowley:
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By Tax Dragon
26th Sep 2021 18:36

Paul Crowley wrote:

I still think first transfer is key

By and large I like HMRC guidance on PRR. Informative and well-balanced, IMHO. The bit on divorce, CGT and the family home (start at https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65300p) fits the same mould.

Adam, whether you outsource, buy in or DIY, do read HMRC on divorce.

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Replying to Paul Crowley:
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By AdamMurphy
26th Sep 2021 21:50

Yes, it was in the tax year of separation.

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Replying to AdamMurphy:
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By Tax Dragon
27th Sep 2021 07:17

Paul will probably spoon feed you an answer here, but I think you're big enough now to use a knife and fork. In any event, you need to be able to verify any answers you might be given (trust me, not everything you might read in this forum is correct).

The answers are easy enough to establish (or verify) from the legislation (if you do so thoroughly, you'll find yourself reading bits of ITA to answer your CGT questions - how wonderful! Tax can be so much fun!) But you don't need to read very far through the manual extract I provided (following the links therefrom) to see the significance of Paul's question.

Hint: based on what you say, you no longer need to worry about valuations.

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