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Will PPR relief be affected inter spouse?

H&W rent out their former PPR owned 50/50; H wants to gift his 50% to W

A gift of a former PPR to a daughter is being contemplated. As W is younger and healthier it makes sense for H to gift his 50% to W so she can make the PET for IHT purposes (HMRC don't usually treat this as an assocaied operation - see IHTM14833). 

It appears that W can still rely on the fact that she's owned a 50% interest in the property during the time it was used as the couple's PPR, with the additional 50% interest being effectively an enhancement of her existing interest.

Section 222(7) TCGA 1992 states the period of ownership where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain. Subsections (a) & (b) are not in point because the property is not currently their main residence, so W does not inherit H's PPR history, but it would appear she can rely on her original interest such that the PPR history will apply to the contemplated disposal of a 100% interest to her daughter. The property has not been let.

Do readers agree?

 

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21st May 2018 10:35

Yes.

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to Portia Nina Levin
21st May 2018 11:10

I've discovered H gave W her 50% in 1994 and the case involves dependent relative relief! Therefore W acquired her share post 5/4/88 so no relief for her share. She could transfer back to H so he could claim on 100% but he's not in great health.
Do you agree?

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to Galaxian
21st May 2018 11:50

I'm not sure if I understand the question anymore.

If the house has never been the couple's main residence, then the wife acquires her interest in 1994, when she obtains her first interest. If you're hoping to get relief because the house was the main residence of a dependent relative, then the wife isn't going to get the relief. Assuming the husband had his then 100% interest before 6/4/88, then he gets the relief, to the extent that he makes the disposal.

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to Galaxian
22nd May 2018 05:18

I'm not sure that's correct. You might fall over the bracketed requirement "provided as mentioned above" in s226(3). How was H providing the accommodation after 1994 to the extent that he did not then own the property?

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to Tax Dragon
22nd May 2018 06:58

Elderly mother occupied until 2005. From 1994 and to date H&W have owned 50/50; house let following mother’s death. If W transfers 50% back to H then he is surely eligible for DRR on a 100% interest. He acquired 100% pre 1982 whilst mother was already living there but gifted 50% to W in 1994.

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to Galaxian
22nd May 2018 07:16

I get that he had 100% in 1988. What I'm querying is whether he meets the requirement in s226(3). He can't provide something he doesn't have. He doesn't have half the house.

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to Tax Dragon
22nd May 2018 11:59

Doesn't your analysis ignore the effect of s222(7)?

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to Galaxian
22nd May 2018 13:55

Not that I am aware of; s222(7) is a deeming rule ("...shall be taken to....") specifically in relation to the period of ownership. Being deemed to own something doesn't mean you are able to provide it to someone else.

Note further that s226 does not deem the residence to be that of the taxpayer. What it says is that relief is due as if it were his or her residence.

There's quite a delicate interpretation to do here. I am not sure I have done it correctly - as you see, I have changed my mind at least once today.

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to Tax Dragon
22nd May 2018 13:59

Tax Dragon wrote:

What it says is that relief is due as if it were his or her residence.


I didn't even get that quite right did I? My head is quite thick and achy today. But this is an interesting (to me) thread and I'll come back to it when head is thinner and hurts less.
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to Galaxian
22nd May 2018 09:25

I think I may have been misreading it. The ss says: if the house ceases to be the sole residence (provided as I mentioned), then...

I was reading it as: if the house ceases to be provided as I mentioned, then...

So, as you were. Apologies for any confusion. It's best to read the legislation though.

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