CGT Please help!!

winkus

My mum received two properties in respect of a divorce settlement in July 2011. She has never lived in these properties but they were originally in her and her ex husbands name. One of the properties has a mortgage on it. Mum would like to sell one of the properties and pay off the mortgage. I have looked up CGT liabilities and I notice they want the original purchase price of the property. Would this be the value of the house when she acquired it in her sole name after divorce or the purchase price when she bought it with her ex in 2001?
The reason for selling the property is so that she can pay off the mortgage and use the remainder (approx half the value) into modernising and extending her own home? We would be grateful for any help or if you could point us in the direction of good advice. Many thanks

CLAPTON

the purchase price in 2001

ceeforcat

It would be my view that your cost is:

the cost of the property in 2001 plus the purchase costs associated with this (agents fees etc)

plus the costs of any major improvements while you were still married.

The bad news is that your ex would appear to have made his gain entirely free of tax

ceeforcat

Clapton beat me to it - again!

winkus

Thank you - she hasn't put the house on the market as yet but when she does at what stage will she have to declare CGT? Could you also advise how she would go about finding the purchase costs etc involved as she has no contact with her ex. He was an abusive man who controlled everything. Unfortunately when the house was originally purchased she just signed where he told her too in fear! :0(
Your advice is great appreciated.

ceeforcat

If she sells it now it will have to be declared on her 2011/12 tax return - deadline for online filing 31st January 2013 - also the date for CGT due.

If she sells it after 5th April 2012, the deadline becomes 31st January 2014.

The date of 'sale' is generally when contracts are signed (when deal is irrevocable), not the date money is received.

jimmo

I fear it could be a lot more complicated than you have been advised.
When your mum and her ex bought the property in 2001, it appears they did so jointly and therefore bought a half share each.
You also seem to be saying that the ex’s half share interest in the house was passed to your mum after the divorce.
In which case the usual rules for a married couple do not apply and the ex will be regarded as having sold his share to your mum at market value.
So your mum now owns a house having bought a half share in 2001 and having bought the other half when she acquired it after divorce.
It may be of no direct concern to your mum but the ex appears to have a potential Capital Gains Tax liability on the disposal of his half share interests in 2 houses to your mum, but if, as often happens, your mum, at the same time, disposed of her half share interests in any other houses to her ex then she too has a potential Capital Gains Tax liability on those disposals.
However, when looking at these sort of situations it is vitally important to get the details exactly correct, particularly regarding the date of separation, the date of the decree absolute and whether the disposal was by contract (agreement) or by a court order.
Here are a couple of links to the HMRC manual.
http://www.hmrc.gov.uk/manuals/cgmanual/CG22400.htm
http://www.hmrc.gov.uk/manuals/cgmanual/CG22410.htm

http://www.hmrc.gov.uk/manuals/cgmanual/CG22505.htm

Richie(UK)

I agree with jimmo. The houses have effectively been acquired in two stages; a 50% share originally (with the then husband) and then the remaining 50% as part of the divorce settlement. The CGT computation will need to reflect this.