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Principal Private Residence Relief

Any tips?

Didn't find your answer?

Apologies for this post but I don't do CGT very often these days.

Unmarried man and woman move into a property in 2002, the property being purchased at that time in the woman's name only.  From 2008 onwards the property is let.  Sale of the property is now being considered.

I am aware of the various changes since 6.4.20 (reporting and paying CGT within 30 days, final ownership concession reduced from 18 to 9 months, lettings relief effectively scrapped).

1.  As they are not married, am I correct in not recommending that they put the property into their joint names prior to sale?

2.  Are there any other obvious tips I ought to be aware of?

Replies (21)

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By Justin Bryant
29th Jul 2020 14:53

There are odd people on this website who think a gift of (a share of) the property (to get extra CGT exemption) and then a gift back of the cash proceeds is somehow tax evasion (or at least where a similar gift & gift back trick is done to save SDLT), but I'm not one of them. But that only works for H&W of course, so they need to get married 1st.

You should ask them how they treated the rental income, as that may show a shared beneficial interest (and so 2 x CGT annual exemption).

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Replying to Justin Bryant:
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By Tax Dragon
29th Jul 2020 14:52

I doubt anyone thinks that, since no (CG) tax is evaded compared with a sale to the spouse. And you could avoid SDLT by keeping the cash proceeds below the threshold.

If you were stupid enough to set the cash proceeds higher, but chose not to pay SDLT, that's evasion.

But, Justin, since you're here.... what is a conditional gift, in this context?

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Replying to Tax Dragon:
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By Justin Bryant
29th Jul 2020 15:01

TD, I have made it patently clear that if the gift back is unenforceable then that
should be the end of the matter per the Ramsay case law I cited.

Choosing to label something as a "conditional gift" (whatever that might mean - and it will inevitably mean different things in different contexts) does not get you anywhere (in a court at least), just as labelling yourself an agent or fiduciary etc. does not in itself get you anywhere per this case.

https://www.bailii.org/ew/cases/EWHC/Ch/2020/2002.html

[moderated]

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Replying to Justin Bryant:
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By Tax Dragon
29th Jul 2020 14:57

So I ask again (as it was your suggestion to make the gift conditional), WHAT DID YOU MEAN BY THAT?

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Replying to Justin Bryant:
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By Tax Dragon
29th Jul 2020 15:02

Justin Bryant wrote:

TD, I have made it patently clear that if the gift back is unenforceable then that should be the end of the matter per the Ramsay case law I cited.

FA2003, SDLT, contract includes any agreement, doesn't need enforceability, consideration is taxable, Ramsay irrelevant.

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Replying to Tax Dragon:
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By Justin Bryant
29th Jul 2020 15:07

You are trying to run a Ramsay argument and are ignoring what I have said there.

Even if you were right on Ramsay, there would be no consideration due to the "obligation" to gift back (like with a sale & leaseback).

[moderated]

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Replying to Justin Bryant:
Psycho
By Wilson Philips
29th Jul 2020 15:13

Seriously? A sale and leaseback is nothing like a gift and gift back. Your arguments are becoming stranger and stranger.

And now you're back to talking about an obligation to gift back, which implies some sort of enforceability, yet you have previously said that the gift back must be entirely unenforceable to avoid a potential challenge.

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Replying to Wilson Philips:
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By Tax Dragon
29th Jul 2020 15:18

Wilson Philips wrote:

And now you're back to talking about an obligation to gift back, which implies some sort of enforceability, yet you have previously said that the gift back must be entirely unenforceable to avoid a potential challenge.

To be fair, I do get that point. He means Ramsay could apply only if there was such an obligation. But as there is a charge without calling on Ramsay, it is (like so much of what he says) irrelevant.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
29th Jul 2020 15:23

I get the point, too. But the point that he seems to be unable to explain is that if there is no such obligation (so that Ramsay cannot apply) then (a) what is the conditionality to which he refers and (b) how does he get round the risk of losing the asset if there is in fact no enforceable obligation or condition. I can only imagine that some sort of deception - trickery if you will - must be involved.

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Replying to Tax Dragon:
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By Justin Bryant
29th Jul 2020 15:33

To be fair, you are the only person to have raised the only potential problem issue here, which is that it could potentially be treated as an exchange, but as I have indicated you need to implement it carefully and I am bored going on and on about all this now to be frank.

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Replying to Justin Bryant:
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By Tax Dragon
29th Jul 2020 16:14

Justin Bryant wrote:

To be fair, you are the only person to have raised the only potential problem issue here, which is that it could potentially be treated as an exchange...

To be clear, that is not an application of Ramsay, but of statute.

At least we all agree on one thing - none of us would do this personally. (I should have stopped [10 years ago? Three threads, anyway] with "and that's probably enough said". I am stopping now.)

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Replying to Wilson Philips:
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By Justin Bryant
29th Jul 2020 15:37

Clearly I meant if there was a written agreement to gift back (as per HMRC's sale & leaseback guidance), not that you would understand that.

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Replying to Justin Bryant:
Psycho
By Wilson Philips
29th Jul 2020 16:41

Round and round we go. It wasn't particularly clear, as I thought that we were talking about unenforceable transactions ("TD, I have made it patently clear that if the gift back is unenforceable then that should be the end of the matter"). So why are you now referring to an "obligation" to gift back?

If there's a written agrement to gift back then it's hardly a gift in the first place, is it? (And a sale and leaseback is a particular type of transaction, involving two quite different components. A gift, with a written agreement to gift back, is arguably a non-transaction.)

I've given up asking you to explain how you would avoid the risk of losing the asset while at the same time remaining squeaky clean. I can only assume that your refusal to answer is because you cannot. So let's leave it there.

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Replying to Justin Bryant:
Stepurhan
By stepurhan
29th Jul 2020 17:01

Justin Bryant wrote:

Clearly I meant if there was a written agreement to gift back


So you're saying if there was a legally binding verbal contract to gift back, but you were careful not to put it in writing, that would be fine? Because I cannot help thinking that is still two gifts with a direct link and not putting the second part in writing is acknowledgement that the two gifts being agreed at the outset is dodgy.
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Replying to Justin Bryant:
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By gillybean04
29th Jul 2020 18:25

Justin Bryant wrote:

You are trying to run a Ramsay argument and are ignoring what I have said there.

Even if you were right on Ramsay, there would be no consideration due to the "obligation" to gift back (like with a sale & leaseback). I doubt you'll understand what I'm talking about there, considering you are so thick.

I'll be the first to admit CGT isn't well traversed material for me, so forgive me guys if I'm missing something.

How can it be a gift if you need to give it back? In fact, how can it be a gift if any consideration is required in exchange? How can the consideration pass back from B to A when the consideration never passed from A to B in the first place?

I also can't think of more than 1 meaning of conditional gift. So much so, my mind is now going into overdrive to think of all possibilities it might mean something else.

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Replying to Justin Bryant:
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By Tax Dragon
29th Jul 2020 15:07

Justin Bryant wrote:

Choosing to label something as a "conditional gift" (whatever that might mean....

Priceless edit.

All you had to say (the first time I asked, feels like 10 years ago) was that typing the word "conditional" had been the result of your fingers running away with you and you hadn't meant anything by it.

Can you really not understand why other contributors sometimes find you aggravating in the extreme?

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Replying to Justin Bryant:
Psycho
By Wilson Philips
29th Jul 2020 15:07

I don't see any mention of a gift back of anything in the OP. So your reference is, as usual, irrelevant.

Even if there were a gift (back) of cash, that bears very little similarity to the SDLT query to which I assume you are referring, where it was the same asset that was being handed back. So your reference to that other query is, as usual, irrelevant. (As is your suggestion that anyone has challenged the gift of an asset with a 'gift back' of cash - let's see you provide evidence of that.)

Again for the avoidance of doubt, while I may be one of those odd people to whom you refer I have never disagreed with the premise that two unconnected and genine gifts should be OK, I would be slightly concerned if it involved, to paraphrase slightly, an element of trickery.

We're still waiting for you to explain what a condiitonal gift is and how you might implement arrngements correctly in order toa void the addiitonal tax charges while at the same time avoding hte risk of losingthe asset forever.

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Replying to John Stone:
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By Paul Crowley
29th Jul 2020 18:27

Apologies but this battle is now on its third thread, the first one stopped by Aweb moderation.

Not being married really is the problem

HMRC also have a problem with transfers that reduce tax after decision to sell has been made. Decision, not advertising

Not that difficult for HMRC to identify a recent transfer in the few months before sale made. SDLT in HMRC's hands.

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By Paul Crowley
29th Jul 2020 18:42

Does anyone remember covenanted income?
Must be a gift, no reciprocity.
A real gift
Does anyone remember the Accountancy Age regular reports of covenant groups being discovered and the tax employee and the accountant members being prosecuted and loads of publicity?
Not direct A to B's son and B to A's son, but the web ended up with all dads making a covenant and all sons getting covenanted income, and guess what: spread over time.
Well done HM Inland Revenue for discovering tax evasion.

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By Matrix
30th Jul 2020 07:57

I thought there were anti avoidance rules if steps were taken to transfer a property just before sale.

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Replying to Matrix:
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By Paul Crowley
30th Jul 2020 11:00

Concur

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