Capital gains tax, gifting, private principal relief on rental property

mustardseed6

For all tax boffins out there:-

H & W bought a property for £80K in 1997 as tenants in common. They lived in it as their OMR until 2007. It has been let out since then. H became HRIT in 2010/11 and so H gifted 49% to W, who is BRIT, in March 2011 at nil gain/nil loss. W has beneficial ownership of 99% of the property. If in 2 years time, they wish to dispose the property when market conditions improve, does the W still retain PPR for the gifted 49% for the years 1997-2007, letting relief and last 3 years ownership.
What happens if the W regifts 49% back to H? Current market value of the property is £225K.
Thank you for all your advice in advance.

ceeforcat

HMRC could have fun with this one - are you stating that, on SA returns, H has been declaring 1% of income from property and W 99%? Was a formal valuation carried out at the time of the gift of 49% and, if so, what was it?

With that information we will be somewhat further on but I will say that, in my opinion, HMRC will be all over this like a rash.

jimmo

If this house had been owned by one person throughout then in very rough figures you would have
Overall gain £145k
period of ownership 14 years
main residence 10 years
final 3 years of ownership 3 years
total exempt period 13 years
Exempt gain(13/14 *145k) £134k
Non exempt gain £11k
That is more than covered by lettings relief (max £40k).
As there have been 2 owners the overall gain has to be apportioned between them but the fractions remain the same and they will both be exempt.
Regardless of the amount of their respective shares the period of ownership commenced when they bought the house jointly and will end when they sell it.
http://www.hmrc.gov.uk/manuals/cgmanual/cg64930.htm