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PPR for transferee spouse

PPR for transferee spouse

I have a client who sold the flat she was living in order to moving in with her fiance.

HMRC have clarified in CG64950 that "the period of ownership of the transferee is treated by TCGA92/S222 (7)(a) as beginning at the beginning of the period of ownership of the transferor."  However, it is only possible to have one PPR at any one time.

As she has already used PPR to exempt the gain on her home, does this mean that she would now be liable to tax for so much of the period as she had two homes?

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29th Apr 2015 10:19

Two homes

Which "two homes" are you referring to?

You seem to be implying that some transfer of ownership of her fiance's property took place when she moved in, but if so you forgot to mention it.

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By K81
29th Apr 2015 10:42

?

Simplified -

the lady receives PPR on her flat if it was her only main residence so no capital gains tax due on the proceeds of sale.

 

PPR only due on residence at fiancés property if your lady is joint owner.

 

 

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By ComanCo
29th Apr 2015 23:08

To clarify:

When the property is moved into joint names (when she moved in), the new owner is treated as owning the property beginning on a date when she had another PPR.

She has sold the old flat and it was treated as exempt, since she always lived there.  Consequently, she cannot also get PPR on the ‘inherited’ period of occupation on her current home, since the inherited period overlaps with a time when she was living elsewhere.

They would be better off from a tax point of view moving the new home back into sole ownership of the original owner.  I may have answered my own question.

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30th Apr 2015 10:54

Are you sure?

ComanCo wrote:

When the property is moved into joint names (when she moved in), the new owner is treated as owning the property beginning on a date when she had another PPR.

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By ComanCo
30th Apr 2015 13:13

 

 

Intuitively one would want to maintain that half the property is transferred when a couple marry under the spouse exemption, and therefore the property becomes the PPR of acquiring spouse from the date of acquisition.  I think this is the simplification that K18 makes in the post above.

The HMRC guidance here explains the pitfall perhaps better than I can:

http://www.hmrc.gov.uk/manuals/cgmanual/cg64953.htm

This deals with the situation where transferor has a period whether the joint property was not a PPR.  However in my scenario, the transferee has a period whether the joint property would not usually be a PPR.  However the HMRC guidance uses the term "for any part" and therefore this could be interpreted to mean for any part, regardless of whether the transferee had another PPR at the same time.  This would be similar to the final period of occupation (now 18 months) override.

Given that my issue has not raised many responses, I am guessing that it is not an issue that practitioners have had to face HMRC about in large numbers.

 

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By BKD
30th Apr 2015 14:19

I don't think there is a problem

If I understand the OP's concern, using theoretical dates to illustrate:

Girl lives in property A 2000 to 2010. She sells A and immediately moves in to B with fiance, who she marries shortly afterwards. Husband then transfers B to wife. They live there until 2015 when the property is sold. Husband has used B as his main residence since 2000.

s222(7)(a) and, in particular, s222(7)(b), provide that in these circumstances she will be treated as having acquired B, as a main residence, in 2000.

Your concern is that she will apparently get PPR for two properties at the same time. Well, ss 7(a) and (b) are merely deeming provisions for the purpose of calculating the amount of relief - they do not assume that the transferee actually resided in the property at that  earlier time or that she actually had 2 main residences at the same time. Secondly, ss7(b) is quite unambiguous - the property will  be treated as her main residence for that period. So how would you deal with the 'double' relief - go back and withdraw PPR in respect of property A? Clearly that would be absurd.

In fact, there would be no double PPR relief. Were it not for the no gain/no loss provision for interspouse transfers, husband would have had a gain on transfer to wife, wholly covered by PPR - with no option to elect out of the exemption so as to preserve PPR. ss 7(a) and (b) simply operate to preserve the PPR that would otherwise have been available to the husband had he retained the property or had the transfer otherwise have been chargeable.

In my opinion, therefore, giving the wife full PPR on both properties is both logical and in accordance with the legislation.

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By BKD
30th Apr 2015 14:37

I don't think that you're misisng anything

The inference is that the couple were married before the transfer of the property.

If they were not married at the time of transfer, then as both you and I have alluded to, there would be a chargeable gain on husband, wholly covered by PPR. If they were married, then the legislation operates to preserve the relief that would otherwise be lost, and is unaffected by the transferee's previous circumstances. (If you like, the transferee's history no longer exists, her having stepped into the shoes of the transferor.)

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By ComanCo
30th Apr 2015 15:01

Thank you BKD.  It is a

Thank you BKD.  It is a legislation that gives married couples considerable tax relief.  If the jointly owned home is ever let out, the denominator (i.e. period of ownership and occupation) in any calculation about PPR and lettings relief would improve the position for both couple.  This is especially as there is £40,000 letting relief cap per person.

I am dealing with theoretical clients in my question, hence some of the vagueness on dates and marital status.

Thank you for your time and appreciation.

 

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