Capital Gains and Primary Residences

DJ81

Again, thank you all...my first post ended with 'I'll have to seek professional advice regardless', I think the fact that I've received quite a few posts all pointing me in the same direction means I can cancel that Accountant appointment and at least save myself £100 there...

The final straw I'm going to clutch at to save a few more quid is something a colleague mentioned to me regarding my wife's annual CGT allowance (but bear in mind before you hit the caps key that I think this is nonsense, just checking for good measure given you've all been so helpful thus far) - my wife was never on the mortgage, the flat was bought, owned and sold in my name, therefore I'm going to safely assume there's no way we can use her annual allowance to reduce the bill I pay in this tax year (as in, there's no way to retrospectively claim what's mine is hers and a portion of the capital gain should be attributed to her)?

AdrianC

Clutching at straws really is what you're doing.

No, your allowances are not interchangeable, any more than they are for Income Tax.

00ec25

DJ81 wrote: »

The final straw I'm going to clutch at to save a few more quid is something a colleague mentioned to me regarding my wife's annual CGT allowance (but bear in mind before you hit the caps key that I think this is nonsense, just checking for good measure given you've all been so helpful thus far) - my wife was never on the mortgage, the flat was bought, owned and sold in my name, therefore I'm going to safely assume there's no way we can use her annual allowance to reduce the bill I pay in this tax year (as in, there's no way to retrospectively claim what's mine is hers and a portion of the capital gain should be attributed to her)?

no you cannot make the wife a beneficial owner of the property after it has been sold !

your friend was right in suggesting joint ownership would reduce the tax bill, but that is obviously now impossible since you don't own it any more and only you were entitled to receive the proceeds from the sale of the property held solely in your name

DJ81

Well then, that's fairly unequivocal. Thank you all, I'm off to work out my tax bill, hope you all have a lovely Easter!

Mojisola

DJ81 wrote: »

Thank you all, I'm off to work out my tax bill

Remember that you only have a tax bill because you've made a large gain - look on the bright side!

silvercar

In my mind this is the only thing that would have legs:

b) that you were never the beneficial owner of the property, it was bought solely for the benefit of your mother and held by you in trust for her. very difficult without proper legal documentation You sold it and you took the money, your mother (or her estate) didn't get a brass farthing from it, that is the fact of the case

Fairly weak legs...

You could argue that it was bought in your name (as you were the only one who could get a mortgage) with the bulk of the purchase money coming from your mother. So she was the beneficial owner. It is a weak argument as you paid the mortgage.

But you could be saying that when it was sold the ownership had passed to you as an inheritance, hence you kept the money.

2 questions:

What happened to the flat between your mother's death in 2015 and the sale at the end of 2017?

When your mother's estate was sorted, did the fact that she had given you a large sum as deposit for the property effect the size of the estate. Given the gift was made only 5 years before her death and she lived in the property, there is an argument that it was a Potentially Exempt Transfer and should have been included in her estate.

DJ81

Hi Silvercar, thanks for replying...a glimmer of hope, perhaps!
(1 ) the flat was completely vacant...a lot of wasted council tax and mortgage interest as I sat and figured out what to do with it, hence the desire to minimise the CGT where possible (even though I obviously recognise that HMRC isn't there to subsidise my inaction and poor choices...)
(2) my mother's estate was tiny and I was the only next of kin - we did ask a solicitor the weeks before she passed away about the fact that she had gifted me the deposit and they stated that given the size of the transfer (~30k) and the value of her estate (honestly, we're talking a car and about £500 in her current account) that nothing was material and I didn't need to declare this for inheritance tax purposes.

You're suggesting that (potentially...weak legs and straws included), that if I could prove that in some senses the flat was always my mother's and hence this asset should have actually passed to me within her estate that whatever gains I make on the sale of this would be subject to the ~325k inheritance limit as opposed to a stand-alone CGT calculation for myself?

Correct me if I misunderstand you or my answer to (2) negates your point.

AdrianC

Proving the flat was your mother's is going to be hard when you've been paying a mortgage that was in your name...


Again - remember that CGT is just a minority (18% if you're a standard rate taxpayer, 28% if higher rate) of the GAIN THAT YOU HAVE MADE on the value of the property while you've owned it.

Or, let me put that a different way, 82% (or 72%) of the gain is yours to keep after you've paid the tax on it.

00ec25

DJ81 wrote: »

Correct me if I misunderstand you or my answer to (2) negates your point.

the issue at hand is if you can show that the only reason you purchased the property was to provide a residence for your mother whilst she was alive, ie, it was held on trust for her whilst she had a "life interest" in it, then, and only then, would you be able to claim partial exemption

note the word partial.
Mother died. From the date of her death onwards any life interest died with her, and you are certainly liable to CGT from then until sale in 2017.

please stop and take a reality check...
yes i know you resent paying tax
yes i know this may be the most money you'll ever get in your life
BUT, if you try and establish mother was the beneficial owner and thus you inherited the property on her death free of CGT to the date of her death, you will probably spend more in legal and professional fees than if you just paid the CGT and had done with it

DJ81

00ec25 wrote: »

please stop and take a reality check...
yes i know you resent paying tax
yes i know this may be the most money you'll ever get in your life

...I've been really grateful for everyone's quick, generally friendly and above all seemingly educated advice. I think at worst you could call my opening post slightly naive or potentially I was attempting to present the case in a certain light to accentuate the (what I assumed would be) non-standard elements of my case (the fact my mother was dependent on me, it was a residential mortgage, etc.). The responses I've received have helped me to understand that the situation is a lot more clear-cut than I first thought and my final reply before SilverCar's response acknowledged the reality of the situation in a fairly straightforward and friendly manner.

I'm still grateful for your advice and everything that has been posted in response (whether in caps or not...), I just think sweeping statements like this aren't helpful, assume an awful lot about my situation and mentality and ultimately lead the discussion off-topic.

But all that said, I'm still very grateful for everyone taking the time to reply today. Again, wish everyone the best for Easter.