transfer to spouse rental property

I bought a house in 1999 and lived in it until 2006 when i let it out till now - i now need to sell

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Hi,

Apologies if i am asking a question that has been dealt with before.

I bought a house in 1999 and lived in it until 2006 when i let it out till now - i now need to sell;

I got married in 2007 and my wife never lived at the rented property. I now need to sell and it looks like a large capital gains

bill even after all the deductions. Is there any way i can use my wife to reduce this as she does not work or have any income;

If i transfer it too her - will that be a mistake as i loose all the PPR for the 7 years i lived there ?

 

thanks

H

Replies (12)

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By possep
23rd Feb 2017 09:50

Without posting any figures how do you expect to get an accurate answer. You won't lose any PPR relief but she won't have any. There is also letting relief to be considered as well as any enhancement costs. For the relatively low cost of getting the correct answer take some (paid for) professional advice.

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By Justin Bryant
23rd Feb 2017 09:50

You need to move back into it and live there for a while as H&W then transfer it to your wife. That way she should get full PPR when selling it as she is treated as having had it as her OMR since when you bought it. This has been mentioned here a few times before. See:
https://www.taxation.co.uk/Articles/2012/02/01/35091/spouse%E2%80%99s-tr...

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Replying to Justin Bryant:
Stepurhan
By stepurhan
23rd Feb 2017 10:41

Justin Bryant wrote:
https://www.taxation.co.uk/Articles/2012/02/01/35091/spouse%E2%80%99s-tr...

That link doesn't lead to a specific article. Where was it supposed to point?

HMRC will look closely at quality of occupation and they will investigate intention. If they find any indication that this was only a temporary arrangement to try to secure PPR relief they will contest it. They have also won many cases on this in recent years.

Given you say you "need" to sell it I am assuming some urgency. If that is the case, I consider it extremely unlikely that you will be able to secure PPR for your wife.

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By hraja77
23rd Feb 2017 22:31

So if we were to move back for a month - then i gift it to my wife - and she was to buy a house from the proceeds which would be solely in her name - would that be ok from a HMRC point of view ?

thanks guys some really good info here

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Replying to hraja77:
By Tim Vane
24th Feb 2017 01:53

hraja77 wrote:
would that be ok from a HMRC point of view ?

That would be perfectly ok from HMRC's point of view since it would make the job of disallowing the PPR very simple indeed and give them easy grounds to dismiss any appeal you might be silly enough to attempt.

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By I'msorryIhaven'taclue
24th Feb 2017 08:09

OP, the Capital Gains Tax ("CGT") may not be quite as much as you anticipate. Let's say that by the time you sell you will have owned the house 18 years. The "gain" on which CGT is payable (which is essentially the difference between the purchase price and the selling price) will be reduced by a number of factors: you lived in it 7 years; and the final 18 months' ownership is also an exempt period for you. So as a starting point you will not be liable to CGT on almost half of the gain (8.5/18ths).

There's also a (further) reduction available for the period in which you let the property; as well as other reliefs that help chip away at the capital gain (notably you can deduct the legal costs of purchase and sale, stamp duty, estate agent's fees, the cost of any improvements you've made to the property.) And, at the end of all that, the first £11,000 or so of the resultant capital gain should be exempt from CGT courtesy of your annual tax-free allowance.

I mention all this because I have a recently acquired client whose previous accountant - a bloke in the pub who charged him £200 a year to do his accounts and SA tax return - told him he would have to pay over £100k CGT on his BTL. He'd used some weird and wonderful back-of-a-beermat calculation which it seems involved deducting the mortgage as an exempt amount (which is laughably off-beam). Properly done, the actual CGT will be under £20k, a game-changer for the client.

Arm yourself with the facts of your case - the month and year of purchase, price paid, all the associated costs, details of any capital spend over the years, the month you first let the property, any tenant-gaps, and so on; and go seek paid-for advice. Why? Well there are other factors and pitfalls which are outside the scope of this thread that your adviser will consider. Such as? Well, if you happen to be selling to a relative or some other connected person then that can affect things. There, that's all you're getting.

Good luck

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By hraja77
24th Feb 2017 09:12

Thanks for everyone who responded - some excellent stuff here - maybe being cheeky but i haven't done any calculations yet without all the deductions like capital costs, estate agents etc what would my take be as i high rate taxpayer with the details

Bought in October 1999 for £160,000
Sell in April 2017 for 530,000
Was my main residence from Oct 1999 to June 2006;
Rented out from June 2006 till April 2017;

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Replying to hraja77:
By JCresswellTax
24th Feb 2017 09:56

Yeah you are being cheeky.

You are a higher rate taxpayer, go an pay for some bloody advice from someone who has worked their [***] off to know the answer to the question you are asking.

You have had plenty of free advice! BEAT IT

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By Tim Vane
24th Feb 2017 10:22

£8,060.

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Replying to Tim Vane:
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By hraja77
24th Feb 2017 10:35

thanks Tim - I thought it would be much more than that - can you show me how you work that out - willing to offer you a small price via paypal or something - if it is that then i'll shutup and pay it

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Replying to hraja77:
Stepurhan
By stepurhan
24th Feb 2017 10:51

hraja77 wrote:

thanks Tim - I thought it would be much more than that - can you show me how you work that out - willing to offer you a small price via paypal or something - if it is that then i'll shutup and pay it

If all you're offering is a "small price" then this answer is all you deserve.

Good luck trying to get the HMRC enquiry dealt with for free.

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Replying to hraja77:
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By I'msorryIhaven'taclue
24th Feb 2017 11:19

hraja77 wrote:

thanks Tim - I thought it would be much more than that - can you show me how you work that out - willing to offer you a small price via paypal or something - if it is that then i'll shutup and pay it

hraja77, did you not hark my cautionary tale of the bloke getting CGT advice on the cheap in his local pub? Why are you hustling on a peopleperhour basis with something as important as planning a disposal that's going to net you over £300k?

£8,060 isn't a real figure - your exposure is likely to be more like five times that based on what we know / deduce thus far - it's just a joke figure among accountants on this forum used to signify the optimum. If you want Tim to calculate your gain properly, advise you, not to mention steer you clear of the pitfalls then go hire him properly.

If you persist with this behaviour I'm going to give your number to that £200 accountant at the local pub that I told you about - the one who estimated £1ook CGT for a £15k exposure! He'd be only to happy to calculate your gain for a small price via Paypal.

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