Property exempt from CGT ?

Dorthe

Hi

I have a rather complex situation, that I would appreciate some advice on:

My partner bought a flat some 20 years ago and lived there until Nov 2004.
I moved in (from rented accomondation) in Jan 2002, and also lived there until Nov 2004, where we bought house together.

In order to finance the house, the flat was put in joint names in Nov 2004.

Since then the flat has been rented out.

We're now in the process of selling the flat (estimated to be completed before Nov 07, so within 3 years of moving out).

I can understand the my partners share of the house will be exempt from CGT, as she lived in it all the time (except for last 3 years, which are exempt anyway)..

But.. What about my share? Can I claim residence relief, as I did live there from Jan 2002 - Nov 04 (but at this time the flat was not in my name), or will I have to pay CGT?

Any advice is greatly appreciated. :T

Thanks
Dorthe

Dithering_Dad

Here's an interesting article that may cast some light on CGT:

http://www.fool.co.uk/taxes/articles/cgt_property.htm

I would have thought that as CGT is only payable on value gains since 2004 (when you put it into joint names) and because your partner had the property for 20 years prior to that, you could argue that your percentage of the property amounts to, say, 5% so you're entitled to 5% of the gain in value. As long as your 5% comes to less than £9200 (the threshold for paying CGT) - and you make sure it does by manipulating the percentage either up or down - then you should be fine.

cash99

Your partner has no CGT issues if sold before Nov 07 as you say, and this period could well be longer as they will also be entitled to lettings relief.

Your situation is more complex. What % of the property did you receive in Nov 04 was this before, after or at the same time as moving out.

If you are unable to establish that the flat was your principal private residence (PPR) then your percentage of the gain between Nov 04 and the date of sale will be subject to CGT less costs, taper relief and annual exemption.

If you only became part owner of the flat, in order to resolve mortgage issues, in anticipation of moving out then strictly HMRC could argue that the flat is not your PPR even if the transfer of ownership happened before you moved out.

Alternatively you could argue a case for beneficial ownership, and that even though your name was not on the deeds you were part owner from the day you moved in, or some later date between Jan 02 and Nov 04, especially if you were paying towards the mortgage etc. and the transfer in Nov 04 merely confirmed the arrangement prior to moving.

If the gain is large and the tax at 20/40% (the gain is added as the top slice of your income and taxed in the lower rate band or higher rate band or both accordingly) then seek professional advice.

Dorthe

Ooh.. I can see this getting worse :-(

Here are some more details.
I believe the transfer were made in November 04, just before we moved out.
I think we are tenants in common, but nothing was noted about the split.

We did get a civil partnership 6 months after it was made legal.

The exchange of contracts will not be until a few months from now (haven't accepted an offer yet - just checking the scenario).

So by then I would have been the (half) owner for almost 3 years, but only lived in the flat for a few weeks (if any) - I'll have to dig out the forms etc to get the dates.

Would we need to declare the Capital Gain, even if it was to be below the £9200 treshold or exempt?

We'll keep some money aside from the sale in case of investigations.

cash99

jimmo wrote: »

If her disposal of a half share in the property to you happened during a time when you both lived in the property you will benefit from the last 3 years of ownership rules.

Jimmo would you as an inspector have accepted a claim from PPR relief from someone who acquired ownership of a property a matter of days or weeks before they moved out?

Murdina

Dithering dad sorry it does not work like that. It is done on a strict time basis.