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Private Residence Relief - Married couple

Private Residence Relief - Married couple

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Principal Private Residence (PPR) relief - Transfers between spouses

Having done some research, I wanted to confirm that I correctly understand the changes to PRR relief that have taken place after 5/4/20.

I was able to confirm my thinking by looking at the article on Mercer & Hole website (https://www.mercerhole.co.uk/insights/residential-property-and-principal-private-residence-ppr-relief/) but have failed to find similar case study on HMRC examples.

My real case is very similar to the example quoted on M&H website.

Mr X (client since 2016) acquired a house in in Aug-2004, which he occupied as a main home until Nov-2015 (so 135 months in total – 11.25 yrs).  In the meantime he met Mrs Y and in Nov-2015 he moved to her, and our client’s property was let out until end of Dec-21 (so 61 months in total).

2015/16 and 2016/17 was declared as Mr X income and 2017/18 onwards the income was split 50:50 as married couple (marriage in 2017).

They have sold the property in Jan-21 and I only just now (!) have been asked to prepare his and also now hers Tax Return. Of course, they have missed 30 days window for CGT reporting. I was not aware of the disposal until now.

There is no longer a Letting relief applicable (as disposal is post 5/4/20 and Mr X did not live at his home at the same time as his tenants) and only final 9 months is added to the PRR computations.

Am I correct in understanding that Mrs Y can benefit from the half of PRR calculated (12/16.5 years)?

It’s time to catch up on CPD a little bit, but as many of us, I was snowed under the extra covid-19 workload and had to prioritise!

Many thanks for your assistance,

Replies (7)

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By Jane Wanless
06th Oct 2021 11:47

...2015/16 and 2016/17 was declared as Mr X income and 2017/18 onwards the income was split 50:50 as married couple (marriage in 2017).

They were married in 2017, but was the property transferred into joint names, or did they think they should declare jointly as they'd married?

Thanks (1)
panda ketteringUK
By ketteringUK
06th Oct 2021 12:03

Thank you for your query. Transfer of Equity (50%) was actioned in 2018 and I have confirmed this looking at the Land Registry records.

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Replying to ketteringUK:
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By Jane Wanless
06th Oct 2021 12:53

Your case looks in line with M&H's second example - no PPR for the wife as the property was transferred pre 2020 and wife doesn't get husband's PPR history as the property was let at the time of transfer.

A search of AWeb agrees.

https://www.accountingweb.co.uk/any-answers/ppr-and-transfer-of-property...

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Replying to janewanless:
panda ketteringUK
By ketteringUK
06th Oct 2021 13:30

Thank you for your input.

Since my initial query, I had also looked at CG64925 (Private residence relief: ownership period: spouses or civil partners and legatees) which states

'For disposals on or after 6 April 2020, if a dwelling-house is transferred between spouses and who are living together, the period of ownership of the transferee is treated by s222(7)(a) TCGA92 as beginning at the beginning of the period of ownership of the transferor.

This provision only applies for the purpose of computing private residence relief'

The transfer was pre 2020 therefore I have to agree that she cannot claim PPR and not much can be done to reduce her CGT liability.

I have also spoken to the tax advice line, that the company gets through its membership and confirmed the same based on our scenario.

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Replying to ketteringUK:
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By Hugo Fair
06th Oct 2021 13:51

So do you know who advised (or suggested) the 50% transfer to wife in 2018?
Or, more pertinently, I presume it wasn't you as otherwise I'd be notifying my insurers pronto.

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Replying to Hugo Fair:
panda ketteringUK
By ketteringUK
06th Oct 2021 15:05

Mr X made this decision by himself as he was not keen on declaring the whole of property income (higher rate tax payer).

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Replying to ketteringUK:
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By Hugo Fair
06th Oct 2021 16:47

As I suspected ... but that's a relief (of suspense, not of tax of course)!

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