Capital Gains Tax on a shared ownership property

callmeted

I'll try and keep this brief...

In March 2013 I individually purchased a 35% share in a property to be my main residence for £265,000 (my share equated to £92,750), with a housing association owning the remaining share. In August 2015, I staircased to purchase the remaining 65% from the housing association with my wife, with the property valued at £340,000.

I moved out in February 2017, but have kept the property as a buy-to-let since then.

I now intend to sell the property and am fully aware there will be CGT to pay on this. However, will the amount I need to pay be on the difference of £265k or £340k? I can't work this out! Thanks in advance to anyone who can help with this.

Jeremy535897

Neither. It will be the sale proceeds less selling costs, less what you and your wife have paid for it in total (initial and subsequent payments), and if you sell in say December 2020, your ownership is say 93 months, of which 56 (47 occupation plus last 9 months deemed occupation) is exempt, so 37/93 of the gain is taxable, and you and your wife will presumably have £12,300 annual exemption each.

callmeted

Thanks so much. So using your example above, would that mean that in paying £92,750 initially (35%) and a subsequent £221,000 (65%), it will be the sale price (minus costs) minus £313,750, multiplied by 37/93?

Jeremy535897

Yes, assuming you sell in December 2020. I have used whole months to make the example easier, and I may have rounded the wrong way. I am also assuming it was your main residence for those 47 months. I should add that you have to report and pay any capital gains tax due within 30 days of completion. See
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

oldbikebloke

taking your post at face value, do bear in mind that as your wife is co-owner you will need to each account for your respective shares when selling, so the calculation will need to be split between the pair of you. 

Jeremy535897

oldbikebloke said:

taking your post at face value, do bear in mind that as your wife is co-owner you will need to each account for your respective shares when selling, so the calculation will need to be split between the pair of you. 

Yes indeed. That's why I mentioned two annual exemptions. There is a slight oddity in that I suspect you paid all the first 35% and then you jointly paid the other 65%? I assume you simply transferred the property into joint names at some time while you were living there as your main residence? Such a transfer would be at no gain, no loss, and so the practical outcome should be that the calculation is split equally between you, assuming it is owned 50:50. This would not be the case if:

• it wasn't your main residence when you transferred part of your interest to your wife
• it wasn't your main residence at some earlier time when you owned it all

section 222(6) and (7) TCGA 1992.

oldbikebloke

Jeremy535897 said:

Yes indeed. That's why I mentioned two annual exemptions. 

my "your post" meant OP's post 

Jeremy535897

oldbikebloke said:

Jeremy535897 said:

Yes indeed. That's why I mentioned two annual exemptions. 

my "your post" meant OP's post 

Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

oldbikebloke

Jeremy535897 said:
Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

agreed
we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)

Jeremy535897

oldbikebloke said:

Jeremy535897 said:
Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

agreed
we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)

Most of the time that's true, but if for example the property was let out before the wife acquired an interest , presumably when the balance was paid (unlikely I know), the wife would have no main residence relief on her half.

oldbikebloke

Jeremy535897 said:

oldbikebloke said:

Jeremy535897 said:
Yes, I realised that, but it reminded me that there is the odd hole in main residence relief and spouse transfers that might apply here.

agreed
we assume ownership now 50/50 so effectively he has gifted 17.5% to her perfectly free of tax as we know under spousal transfer and she therefore "inherits" his purchase cost of the original 35% even though she never physically paid that
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64950

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg22200

So to repeat what you have already said,  maths boils down to: combined costs x share owned (50/50?)

Most of the time that's true, but if for example the property was let out before the wife acquired an interest , presumably when the balance was paid (unlikely I know), the wife would have no main residence relief on her half.

agreed, and as previously discussed, occupation is a primary requirement for a PRR claim.... if a property is let, it cannot be occupied!