Spouse CGT Allowance

ffs

I have exhausted my CGT allowance for this year

I would like to transfer ownership of a house to my spouse to make use of her CGT allowance

The house is about to be sold, so I would like to complete the transfer first

How does this work?

Does the gift attract any tax?

How is my Spouse's CGT calculated when the house is sold a few weeks later?

[Deleted User]

You have stated very clearly in your second sentence that the sole reason for any transfer is to reduce CGT. HMRC WILL challenge this transfer particularly as the house 'is about to be sold'.

Now if you had done this a at least year ago it could have been argued that there was no intention to sell and you could have been advised as to the other points.

00ec25

as above, where the action is purely to reduce a tax liability HMRC have power to "set aside" (ie ignore) any such transfer

I assume the property has never been your main home and so you have no other relief available than the (now exhausted) personal allowance? if you have then a transfer is not such a good idea anyway

ffs

Thank you both

So it is entirely discretionary how much time needs to elapse between the transfer and the sale?

[Deleted User]

!!!!!! wrote: »

Thank you both

So it is entirely discretionary how much time needs to elapse between the transfer and the sale?

Definitely not. The main reason that a reasonable time between transfer and sale should occur is to strengthen your 'case' that the transfer was not simply to reduce tax e.g. the property is not 'about to be sold' as you have admitted. In your case you would have to disprove something that is clearly happening.

Sometimes the manic need to reduce tax takes over and so, to compare:

A) Sell the property without transfer and your tax will be higher by the annual allowance at 18% or 28%.

Do the transfer. Spend a few hundred in additional solicitor fees in arranging the formal transfer. Submit the return and spend a year worrying whether HMRC will challenge this. If they do, do you deal with HMRC enquiry yourself or engage expensive professional assistance?

You have to bear in mind that HMRC will have access to the fact that:

a) you have been declaring rental income and now will not be but no disposal has been declared.
b) your wife has sold a property but has never declared rental income.

HMRC will also receive details of the disposal from their civil service colleagues.

ffs

Thanks again, your analysis looks spot on

So even if my spouse's entire CGT allowance could be used, we'd only save about £3k, less fees, so about £2.5, if my calcs are right

And as a result of the transfer there would be a significant chance of a challenge from HMRC that would be expensive and/or time consuming to fight, which we'd probably lose anyway

Have I understood correctly?

[Deleted User]

Because there is a CGT on the return it will likely be looked at by a more senior officer (long time since I worked there but there are others on here who may confirm). The one thing you can be sure of is that any query takes months to conclude regardless of the outcome. The stress of it all outweighs any financial implications in my opinion. Not worth it!