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19

CGT change from 6.4.20

holdover

Didn't find your answer?

I know that, at present, it is possible to transfer a property to a spouse (NG/NL) and the spouse to nominate it as their PPR before selling and the gain being exempt as the property has been their PPR for the whole of the period of ownership.

Someone said that this would be no longer possible after 6.4.20.  

Can someone point me in the direction of the change in the legislation which prevents this?

TIA

Replies (19)

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By KarenCCarr
10th Oct 2019 12:28

I think I have found the answer. Spouse takes over ownership history as well as base cost.

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By Duggimon
10th Oct 2019 12:32

Well it's true that this will not be possible from 6/4/2020, though I disagree that it's due to a change in legislation, it's more because it reeks of a fake construct for the purpose of avoiding tax.

Is the spouse going to move into the property with no intention of selling it, live there happily for x months then have an epiphany, change their mind and sell it?

Or is the intention always to sell it and therefore it's never their PPR?

I think the legislation you're looking for is the finance bill 2019/20 which amends TCGA 1992, s. 222(6)(a) to say a husband and wife may only have one PPR between them. I still contest your scheme doesn't work even without that provision, though it removes the need to argue the toss.

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Replying to Duggimon:
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By Tax Dragon
10th Oct 2019 12:52

I'd not clocked this change. But now I've looked I see what'll do the damage is the removal of "which is their only or main residence" from ss7.

The idea can (currently) work, but I agree with you as regards the need for a reality check.

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By Justin Bryant
10th Oct 2019 14:48

This potential CGT planning has been mentioned on this website numerous times over the years and it would not surprise me if HMRC have blocked it due to the publicity here.

There is no law that says you have to pay the most tax possible (you may structure your affairs to take advantage of legislative choices and this is one of them in my view - or why else would they change the law) and HMRC accept that H&W CGT deathbed planning works re GAAR, so I see no reason why the GAAR blocks this.

This legislative choice is no different in principle to making a QCB a non-QCB by having a f/x clause re CGT planning or to the Angel Court CGT planning that was unobjectionable etc.

The most recent similar case re CGT planning was pre-entry losses. See:

http://financeandtax.decisions.tribunals.gov.uk/judgmentfiles/j11184/TC0...

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Replying to Justin Bryant:
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By Tax Dragon
10th Oct 2019 14:46

What's the GAAR got to do with it?

Either a property is a residence or it isn't.

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Replying to Tax Dragon:
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By Justin Bryant
10th Oct 2019 15:19

Perhaps you don't know the scheme, but being the good tax advisor that you are you should always consider the GAAR (and DoTAS etc.) when advising on any tax mitigation planning and someone above (clearly not as good as you) said this is all dodgy etc.

Also don't forget that as Lord Steyn said in IRC v McGucldan "on the contrary, tax avoidance was the spur to executing genuine documents and entering into genuine arrangements". See:

https://publications.parliament.uk/pa/ld199798/ldjudgmt/jd970612/mcguc02...

So if there were no actual residence it would be tax evasion (requiring no legislative change) and not a scheme.

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Replying to Justin Bryant:
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By Tax Dragon
10th Oct 2019 15:35

Justin Bryant wrote:

So if there were no actual residence it would be tax evasion (requiring no legislative change) and not a scheme.

The OP mentioned making a nomination. As you suggest, a nomination has to be based on reality - I think Duggimon was making exactly that point. Anything else is fakery and evasion.

And (it seems to me) it's being blocked by a simple amendment to ss7, as I said. Nowt to do with "schemes".

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Replying to Tax Dragon:
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By Justin Bryant
10th Oct 2019 16:09

I give up (today is World Mental Health Day after all)!

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By Mr J Andrews
14th Oct 2019 11:04

Sorry to [***] in on A.N Other's poser but could this possibly be the same 'Someone' who asked me a somewhat similar question.
Husband and wife pensioners have been letting out a London property for 30 or so years ; capital appreciation since [ probate ] acquisition little short of £800K.
The couple are now moving into this property with no intention of moving again and stronger aims to survive for at least another decade.
Meanwhile the property { PPR } they have lived in for the same period is being gifted to their daughter with no reservation whatsoever.
Are there any headaches in store with this scenario.

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By mail.taxperfect.co.uk
14th Oct 2019 13:42

Current rules: husband owns property. Neither he nor wife have ever lived there. He transfers property to wife. They both move in (it is critical that they move in AFTER the transfer). Then she sells. Her gain is calculated as to sale proceeds less original purchase price (i.e. price paid by husband). Her PRR period is 're-based', being from the date her husband transferred the property to her. Assuming little appreciation between transfer and sale then there will be little chargeable gain.

New rules (wef 6/4/20): scenario as above. Wife will now, however, stand in the shoes of the husband insofar as both the purchase price AND occupation, so the gain upto the date of transfer to her will not be washed away.

My understanding is that the new rules apply only to transfers between spouses made AFTER 5/4/20. So, where a spouse transfers a property to the other before 6/4/20 then the transferee will still be able to benefit from the 're-based' PRR when she comes to sell (whenever that may be).

Do readers agree with 'my understanding'? In which case, still an opportunity for some inter-spouse transfer planning prior to 6/4/20.

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Replying to mail.taxperfect.co.uk:
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By Tax Dragon
14th Oct 2019 14:16

mail.taxperfect.co.uk wrote:

Do readers agree with 'my understanding'?

No. You apply ss7 (to determine the recipient spouse's period of ownership) when that spouse makes a disposal.

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Replying to Tax Dragon:
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By mail.taxperfect.co.uk
14th Oct 2019 14:44

Tax Dragon wrote:

mail.taxperfect.co.uk wrote:

Do readers agree with 'my understanding'?

No. You apply ss7 (to determine the recipient spouse's period of ownership) when that spouse makes a disposal.

OK, thanks. So, what do you make of FB Clause 1 subsection 13? Maybe I'm reading it incorrectly.

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Replying to mail.taxperfect.co.uk:
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By Tax Dragon
14th Oct 2019 15:33

Or... maybe I hadn't read that far.

I now agree. Thank you.

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Replying to mail.taxperfect.co.uk:
By Duggimon
14th Oct 2019 14:25

Your understanding is fine as far as it goes but as I posted above, moving into a house you already intend to sell means it is not your PPR and any attempt to claim otherwise is up for challenge by HMRC.

The new legislation is not to stop this tax "planning" (evasion) but to remove the need to challenge it case by case.

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Replying to Duggimon:
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By mail.taxperfect.co.uk
14th Oct 2019 14:46

Duggimon wrote:

Your understanding is fine as far as it goes but as I posted above, moving into a house you already intend to sell means it is not your PPR and any attempt to claim otherwise is up for challenge by HMRC.

The new legislation is not to stop this tax "planning" (evasion) but to remove the need to challenge it case by case.

Thanks. So, following this through, there wouldn't be a problem if a) the property was originally acquired for occupation, rather than investment, and b) they didn't move in with the (already) intention of selling?

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Replying to mail.taxperfect.co.uk:
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By Justin Bryant
14th Oct 2019 17:50

That is more or less correct as explained on this forum many, many times before (if you do a search you'll see) and well done for suffering these fools gladly.

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Replying to Justin Bryant:
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By Tax Dragon
14th Oct 2019 17:59

Honestly, Justin, if folk only commented here when they'd read the whole of every case, finance act and proposed change and understood them all perfectly, no-one (including you) would ever say anything.

There's a strong case for saying the forum would be all the better for it, but that's another story :-) [... and it wouldn't be a forum then, would it?]

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Replying to Justin Bryant:
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By mail.taxperfect.co.uk
15th Oct 2019 09:51

Justin Bryant wrote:

That is more or less correct as explained on this forum many, many times before (if you do a search you'll see) and well done for suffering these fools gladly.

Not quite sure I understand your reference to "fools" but thanks anyway.

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Replying to mail.taxperfect.co.uk:
Hallerud at Easter
By DJKL
15th Oct 2019 10:21

A Team reference, perhaps?

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