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CGT on swapping properties

Property swap

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An individual owned a rental property and swapped it with his mother, with her transferring the family home to him.  The client had always lived in the family home.  The value of the family home was £25k less than the rental the mother ended up owning so it is the mother that ended up gaining at that stage but as it was a disposal of the PPR no CGT was payable.  The loss made by the son is not being claimed as there will be no further transactions with the mother.  I just wondered if someone could clarify that the base cost for the mother on her recent sale of the rental becomes the value at the date of the swap.

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Hallerud at Easter
By DJKL
20th Oct 2016 10:37

How did the individual deal with his capital gain/loss on disposing of the rental property to his mother?

What figure was used in his computation when declaring on his return?

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Replying to DJKL:
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By WillowTree
20th Oct 2016 11:26

And there's the rub. I have only just heard about it so it hasn't gone on to any returns prior to this. And it happened several years ago.

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Replying to WillowTree:
Portia profile image
By Portia Nina Levin
20th Oct 2016 11:37

It is "and therein lies the rub".

EDIT: Balls! No it isn't. Ignore Portia.

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By johngroganjga
20th Oct 2016 11:48

You say the son made a loss on his disposal but you don't explain how you reach that conclusion.

Was it really because its market value at the date of disposal (yes, market value will apply won't it?) was less than the original cost of purchase plus any subsequent enhancement expenditure?

The mother's base cost now will be that same market value.

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Replying to johngroganjga:
Hallerud at Easter
By DJKL
20th Oct 2016 12:26

John

I read the OP's loss comment as being him/her comparing the value of the assets disposed and the asset acquired to one another rather than any CGT loss calculation re the asset disposed

Of course I could well be misunderstanding.

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Replying to DJKL:
By johngroganjga
20th Oct 2016 12:44

DJKL wrote:

John

I read the OP's loss comment as being him/her comparing the value of the assets disposed and the asset acquired to one another rather than any CGT loss calculation re the asset disposed

Of course I could well be misunderstanding.

So did I. Hence my post trying to steer the OP in a better direction.

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By WillowTree
20th Oct 2016 12:55

Thanks all. Yes, I did just mean he lost out in the value stakes, it wasn't referring to what his actual CG calculation should be.
(note to self: be more clear!)

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Hallerud at Easter
By DJKL
20th Oct 2016 14:28

Well, it looks like the son needs to complete a return (or notify an omission from an earlier return) for the earlier year, use then market value as proceeds, and once that figure is agreed (possibly/very likely negotiated with HMRC and DV) that will give the mother her acquisition cost re any future disposal.

I presume from the question the mother owned the family home as her PPR so she does not need to do a return of any gain/loss, however if not the case-multiple homes- then she also will require to correct her returns re her ,presumably, omitted disposal.

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By Portia Nina Levin
20th Oct 2016 14:39

Not if "several years ago" means "more than 6 complete tax years ago".

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By Stargazer42
24th Oct 2016 11:07

There is a form of relief available if the properties were jointly owned and the exchanges took place - see HMRC CGT manual at CF73000P. However, from your description of events the properies were never jointly owned and therefore this would not apply.
Therefore all transactions would be deemed to take place at market value with the normal reliefs, such as PPR available.

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