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How to defer gains on rental properties

How to defer gains on rental properties

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I have two clients (husband and wife) who have separated and are looking to sort out their assets equitably.

They have two rental properties (owned jointly) which were bought for the same amount and at today's market value are virtually the same value.

They wish to take one property each and so this obviously involves selling a half share in each to the other party and a capital gain would arise for each of them with no funds to pay the tax. One party's gain would be covered by the annual exemption but the other party will have other capital gains in the year.

I am not sure if gift hold over relief applies in this case as I think it relates to land rather than property, am I correct or is there any other way the tax can be deferred?

Thank you for any replies.

Dave

Replies (19)

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By RTFMorSTFW
15th Apr 2016 11:41

TCGA 1992, s. 248A is what you are looking for. http://www.legislation.gov.uk/uksi/2010/157/article/8/made?view=plain

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By bigdave1971
15th Apr 2016 11:47

Forgive me if I'm wrong but isn't that just for land and not property? Just scanning that link it mentioned that a dwelling house is excluded land.

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Replying to Cazzie B:
By johngroganjga
15th Apr 2016 11:56

PPR

bigdave1971 wrote:

Forgive me if I'm wrong but isn't that just for land and not property? Just scanning that link it mentioned that a dwelling house is excluded land.

Only dwellings on which PPR relief is claimable are excluded, for obvious reasons. 

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By Ruddles
15th Apr 2016 11:54

Not just CGT to worry about

SDLT/LBTT (at the additional rate) is also a distinct possibility.

Gift holdover relief would not apply as there is no gift. Possibly replacement of business asset relief though, depending on the nature of the letting.

EDIT - I had forgotten about s248A. "land" usually includes both land and buildings - it is a generic term.

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Replying to Wilson Philips:
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By RTFMorSTFW
15th Apr 2016 12:02

Forgetfulness

Ruddles wrote:

SDLT/LBTT (at the additional rate) is also a distinct possibility.

Gift holdover relief would not apply as there is no gift. Possibly replacement of business asset relief though, depending on the nature of the letting.

EDIT - I had forgotten about s248A. "land" usually includes both land and buildings - it is a generic term.

You also seem to have forgotten about FA 2003, Sch. 3, para. 3(d) and LBTT(S)A 203, Sch. 1, para. 4(d).

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By RTFMorSTFW
15th Apr 2016 11:55

You're wrong. Why not read it properly, rather than just scanning it.

You also need to familiarise yourself with the meaning of land. http://www.legislation.gov.uk/ukpga/1992/12/section/288/enacted?view=plain

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By bigdave1971
15th Apr 2016 11:59

Sorry

I apologise, had I read it properly I would have seen that.

Regarding SDLT, the properties are under the £125,000 threshold so that wouldn't apply anyway.

 

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Replying to thomas34:
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By RTFMorSTFW
15th Apr 2016 12:04

Er...

bigdave1971 wrote:

I apologise, had I read it properly I would have seen that.

Regarding SDLT, the properties are under the £125,000 threshold so that wouldn't apply anyway.

The first £125,000 might now be taxable at 3%, if the exemption does not apply.

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Replying to thomas34:
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By ringi
18th Apr 2016 14:16

3% stamp dutry if not main home

remember the new 3% stamp duty if someone already owns a property.

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By Ruddles
15th Apr 2016 12:14

Er ...

In the interests of rudeness, make your mind up. My reference to SDLT/LBTT was made precisely with the point made in your last post in mind. I mentioned SDLT/LBTT as a possibility because there isn't enough information to determine whether the exemption would apply.

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By bigdave1971
15th Apr 2016 12:14

Thank you for all the help, at least I have been pointed in the right direction, I'll look into it a bit more now.

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By RTFMorSTFW
15th Apr 2016 12:17

The issue in my pot, taking (slight) issue with first your pot was not that you mentioned the possibility, but the distinctness that you chose to attach to that possibility.

My second pot though was made to encourage the OP to recognise that they might be outside their field of competence.

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By Ian McTernan CTA
15th Apr 2016 13:12

Try Reading this:

Take a look at this, regarding year of separation:

 

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

 

 

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Replying to Montrose:
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By RTFMorSTFW
15th Apr 2016 13:33

Assumptions

Ian McTernan CTA wrote:

Take a look at this, regarding year of separation:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/fil...

The decision as to how to divide the assets seems to be being taken now (15 April). Unless they are a remarkably organised and emotionless couple it seems reasonable to assume that the actual separation took place more than 9 days ago.

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By Justin Bryant
15th Apr 2016 13:13

Is RTFMorSTFW

PNL? He/she seems to be as rude and as ignorant as her.

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By cathygrimmer
15th Apr 2016 14:04

@Justin

Given the username, I'd say that was a fair assumption!

Cathy

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By bigdave1971
15th Apr 2016 14:18

Thank you for the extra information about the year of separation but that was actually in 2013/14.

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By RTFMorSTFW
15th Apr 2016 14:22

Zip it Grimmer!

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By cathygrimmer
15th Apr 2016 15:18

@ RTFMorSTFW

That's a bit harsh! I was admiring your new name - a bit of light relief at the end of a stressful week. I prefer it to the last one(s)!

Cathy

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