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Dependent Relative Relief and property transfer

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DRR was granted by HMRC way back when and the client has sensibly kept the proof of that.  The relative went into a home and 15 months later she died.  It is during this period that the client gifted half of the property to his wife and after the death they elected to treat it as their PPR.  3 years later they took their other proprty back on as their PPR and rented this one out commerically.  He now wants to transfer the remainder to his wife but whilst there is no gain/no loss on the transfers, will this affect the reliefs?   I am assuming the DRR was still applicable while the relative was in a home but I cannot find confirmation of that, can anyone confirm that from their experience?  If it was still applicable then I believe the wife took on the DRR period on top of the later PPR and lettings relief.  The client was worried about this latest transfer affecting the reliefs but looking more closesly at the whole scenario I believe its the first transfer that could be a problem and its all or nothing, depending on whether DRR is due in the period between the relative moving out and her death.  Can anyone shed any light?  I'd be very grateful for any input.

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By MJShone
21st Aug 2018 09:15

So on 6 April 1988 the client owned the property and the "dependent relative" (as defined in s226 TCGA 1992) lived in it as (probably ) her main residence?

When you say "DRR was granted by HMRC way back when", what was the transfer on which DRR was granted? Was it the transfer of half to wife? (Which would have been a no gain/no loss transfer, so why claim DRR? Wouldn't that have reduced wife's base cost?)

Whether DRR was still applicable in the 15 months that the relative was in the home depends on the facts. Was it still the relative's sole (note "not only or main") residence, were they expected to return home etc.

As for the wife's share - I don't think she "inherits" the husband's period of ownership. (Someone will correct me if I'm wrong!) So DRR would only apply to a share she acquired pre 6 April 1988.

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By WillowTree
22nd Aug 2018 12:00

No, the DDR was granted to the husband for his relative moving into his property, prior to when he later transferred half of the property to his wife. The transfer to her took place around about the time the relative went into the home. I weill need to find out whether it was thought the relative would return to the property, which had been her only home for many years. My understanding was that a wife could acquire the PPR relief of a husbands home when she acquired it from him but you believe this doesn't extend to DRR?

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By MJShone
23rd Aug 2018 14:31

Looking at s222(7) (which applies to s226, the DRR section) - the wife definitely inherits the husband's period of ownership . I think s222(7)(b) is read in conjunction with s226(2) to say that (contrary to what I thought above before I looked at the legislation) the wife also inherits the period of occupation - so she does inherit the husband's DRR. But don't take my word for it - I've only had a quick look at the legislation - check the legislation and see what you think.

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Replying to MJShone:
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By Tax Dragon
23rd Aug 2018 17:24

MJShone wrote:

But don't take my word for it - I've only had a quick look at the legislation - check the legislation and see what you think.


I think I’m in love.

When s/he follows this excellent advice, the OP will I hope find the mistake you made. Very easy to make, to be fair, if speed-reading the legislation (and/or the question). But you have directed the OP to exactly the right place and the OP should read more slowly and carefully. Having noted the deeming nature of s226, and what that means, an awareness of the issues discussed in CG64950 (and similar) might help.

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