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Capital Gains on let property

I'm struggling to get my head round a capital gains calculation. Please could someone point me to the correct place(s) in the Capital Gains manual?

Husband and wife bought a property in 1989 as a family home for £89k. They didn't move in because a job offer came with a requirement to live in. The house remained empty until 1994 when they split up and the wife moved into the house. They divorced in 1997 and the property transferred to the wife. The value of the property had dropped between 1989 and 1997 so there was no finacial payments made between husband and wife. The house was mortgaged and the wife agreed with the bank that she alone would continue to make the payments based on 1989 valuation. The property was then let between 2005 until 2016 with a break of 13 months in 2013/14 when it was empty for refubishment. It was sold March 2016 for £200k.

My questions are at what point do I take the valuation for PPR - when it was bought in 1989, 1994 when it started being lived in or 1997 when it because the wifes property. Do I need to take half of the value in 1989 and half the value in 1997 for the calculation. The second question is what date do I use for the time apportionment for PPR and lettings relief - 1989, 1994 or 1997. 



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27th Sep 2017 17:47

Good police work on the other threads.

Did you reach any conclusions re your OP? If they were different from: 1) half 1989 half 1997 and 2) 1994(*) then respond here and we can have a convo.

(*) you need more than one date for an apportionment and I'm not sure which of them you are on about, but if in 1994 they had separated and that was set to be permanent, then at that time wife could have her own PPR, which would where she was living. Was that the question? It's possible that s222(8) gives a different answer, depending on the facts.

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28th Sep 2017 09:23

Thanks for the reply, I'm still scratching my head with this one and I've searched HMRC manuals for an answer. The separation was in 1994 but the divorce wasn't until 1997. In 1994 the wife moved into the house alone but it was still in joint names. In 1997 ownership switched to the wife. From speaking to my client I'm told when she took it over there wasn't a valuation done on the property. The bank told my client the property was in negative equity but agreed she could stay there and continue to pay the mortgage on the £89k. It was an interest only mortgage from 1989 up until its sale in 2016. My problem is which is the appropriate start date and which valuation do I need?

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28th Sep 2017 11:22

For PPR arguably you can use 1989, since it would have been the PPR other than for the required job-related accommodation.

Acquisition cost is a little tougher. Had the property transferred in 1984, it would have simply been half the 1989 + half the 1994 value (the 1994 value being assumed in accordance with TCGA 1992 S.58). However, when the property was transferred in 1997, S.58 may not have been in point. There's some ambiguity, since it opens with:
"If, in any year of assessment...."

Now, in any year, they did actually live together as spouses. Just not in the year in which she acquired full title.

If S.58 is not in point then I suspect that the acquisition value will be half x 1989 costs + half x 1997 value. In this case, husband should have probably declared a capital gain/loss based on MV in 1997, though I'll bet he didn't.

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29th Sep 2017 17:38

Lesley, can you keep us updated on this. I'm genuinely curious how it turns out.

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29th Sep 2017 19:20

Yes no problem I'm struggling getting info from the client.

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01st Oct 2017 11:10

The trouble with situations like this is that you need to know the answers to some pretty personal questions in order to be certain of the tax position. It's too easy to apply hindsight and say that the breakdown in 1994 must have been permanent because they divorced three years later.

SteLacca is right about s58; you also need to read s288(3) and where that takes you, correctly to interpret s58.

Assuming a) the wife owned half the from 1989 to 1997 and the whole from 1997, and b) s58 did not apply to the transfer in 1997 then her base cost is half of the 1989 costs and half MV 1997.

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