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CGT base cost of gifted property

Connected or not?

One of my clients is an unmarried couple. Been together 10 years, 3 kids.

 

They want to move to a larger house, and put existing house solely into male's name, and start renting it out.

 

As far as I can see, gift is OK and no stamp duty, but they would be deemed unconnected for CGT, therefore the male would have a CGT base cost of zero going forward for the half gifted to him.

 

Is that correct? If yes, not worth doing unless they get married!

 

Also, property has no mortgage, therefore I assume no SDLT?

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05th Nov 2017 11:44

How do you reach the conclusion that the male partner’s CGT base cost for the half gifted would be Zero?

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05th Nov 2017 14:44

It doesn't matter if they are connected or not. It is a bargain otherwise than at arm's length, meaning the deemed consideration for CGT purposes is market value.

It is also a disposition inter vivos at market value for IHT purposes, which is the thing that could come along and give everybody a surprise bite in the [***].

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to Portia Nina Levin
05th Nov 2017 20:55

It could be immediately reportable for IHT - which would not be the case for a transfer between spouses.

Other legislation could also have a nibble. The exception in ITTOIA s626, for instance, would also require the couple to be married.

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to Tax Dragon
05th Nov 2017 22:18

You will need to enlighten me as to why:
- a PET might be immediately reportable for IHT purposes, and
- the exception in s 626 might be relevant in relation to a transfer of property between persons who are not each other's spouses.

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to Portia Nina Levin
05th Nov 2017 23:59

I might have to give you the PET point. Put that down to Friday night revelry.

But the fact that s626 does not apply was exactly my second point. (I thought that's what I said.) As they're not each other's spouses, the exception in s626 is not relevent. So s624 might bite in a way that it would not do for a married couple.

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to Tax Dragon
06th Nov 2017 10:35

Tax Dragon wrote:

But the fact that s626 does not apply was exactly my second point. (I thought that's what I said.) As they're not each other's spouses, the exception in s626 is not relevent. So s624 might bite in a way that it would not do for a married couple.

And my point was that s 624 can only apply in the first place if the settlor or their spouse retains an interest in the settled property. An outright gift is proposed, and so if the donee is not the donor's spouse, the s 626 exception is not needed, because s 624 cannot "bite" in the first place.

Friday night revelry did well to have its effects last through to Sunday evening.

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to Portia Nina Levin
06th Nov 2017 10:50

We should meet in the middle. S625 has something to say to both of us.

Don't tell me you haven't been there... long Friday night, short weekend.

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