CGT: principal residence relief on a house we no longer occupy

2lateagain

Hello,
I bought a house 35 years ago, lived in it for 25 years and then moved out: it has been unoccupied since then. It's in my name alone. I got married while I lived there and my wife and I still live together in our "new" home. I have a buyer for our old home and understand that there will be CGT to pay. If I transfer part-ownership to my wife before the sale, will she qualify for principal residence relief on any of the time for which it was my/our home? I have read various Q&As in which it's stated that a transferee doesn't get PRR if the transfer takes place while the property isn't the main home; however in HMRC's guidance CG64950 it states: "Where the disposal between spouses or civil partners living together was made before 6 April 2020, the dwelling-house must have been their only or main residence at the time of the transfer, or the date of death where a dwelling-house passes from one to the other on the death", from which it might be inferred that that restriction no longer applies. Can anyone confirm one way or the other, please?

[Deleted User]

Just to be clear. The house has been up for sale and, only after you have found a buyer, you now wish to transfer it into joint names with your wife. Is this correct?

Pennywise

You risk losing half the private residence relief you already qualify for if you transfer half the house to your wife if she never lived it as HER main residence.  So you need to crunch the numbers.  It could well be worth the loss of main residence relief on half the gain if you can use her annual CGT exemption and basic rate tax band - depends on the numbers.  But you may well be too late as you should have transferred half to her earlier in the sale cycle as doing it too close to exchange of contracts could be challenged as artificial purely for tax avoidance.

[Deleted User]

Pennywise said:

You risk losing half the private residence relief you already qualify for if you transfer half the house to your wife if she never lived it as HER main residence.  So you need to crunch the numbers.  It could well be worth the loss of main residence relief on half the gain if you can use her annual CGT exemption and basic rate tax band - depends on the numbers.  But you may well be too late as you should have transferred half to her earlier in the sale cycle as doing it too close to exchange of contracts could be challenged as artificial purely for tax avoidance.

Yes. I sought clarity as the op stated that the house was in his sole name but also referred to it as ‘our old home’ and in the heading states that it is a house that ‘we no longer occupy’

Jeremy535897

I remember purdyoaten and I came across this odd little amendment to section 222(7)TCGA 1992 made by section 24(10) FA 2020, which removes the risk pennywise refers to. There is a discussion of the point on another thread. That does not remove the risk referred to concerning the tax avoidance point, though.

2lateagain

[Deleted User] said:

Just to be clear. The house has been up for sale and, only after you have found a buyer, you now wish to transfer it into joint names with your wife. Is this correct?

As things stand at the moment, yes. I had no idea the timing mattered in the way Pennywise has said - our accountant said we should transfer the day before completion.

2lateagain

Pennywise said:

You risk losing half the private residence relief you already qualify for if you transfer half the house to your wife if she never lived it as HER main residence.  So you need to crunch the numbers.  It could well be worth the loss of main residence relief on half the gain if you can use her annual CGT exemption and basic rate tax band - depends on the numbers.  But you may well be too late as you should have transferred half to her earlier in the sale cycle as doing it too close to exchange of contracts could be challenged as artificial purely for tax avoidance.

If it helps to clarify: I bought in 1986 and married in 1991, when my wife moved in; we lived there together until 2011. Given that it has taken us this long to get round to selling (for various reasons), perhaps we should defer selling and make a transfer in the meantime?

[Deleted User]

2lateagain said:

purdyoaten2 said:

Just to be clear. The house has been up for sale and, only after you have found a buyer, you now wish to transfer it into joint names with your wife. Is this correct?

As things stand at the moment, yes. I had no idea the timing mattered in the way Pennywise has said - our accountant said we should transfer the day before completion.

That’s great advice - not!  Take a look at this example. Apart from anything else it shows that HMRC can challenge the transfer, whether successful or not. Broadly, if you can provide reasonable ‘evidence’ that, at the time of the transfer, there was no intention to sell (before advertising, for example) you should be fine Otherwise it could reasonably be argued that the SOLE reason for the transfer was to avoid tax on a transaction already initiated beforehand. 

Many have argued the the legitimacy of the challenge by HMRC - I have personally had experience of this. Why give HMRC the opportunity? 

https://www.taxation.co.uk/articles/2006-03-16-3904-transfer-troubles

Pennywise also makes an important point. Does your account know about the loss of 50% of the main residence relief that you have built up? Surely this is a game-changer?

If you want to provide some figures we can have a look.

2lateagain

Thanks. I appreciate the experience and advice being offered.

First-off, given the quote from CG64950, is it still the case that a transfer made after we stopped living in the house would result in a loss of PPR on the transferred portion?

Jeremy535897

Pennywise also makes an important point. Does your account know about the loss of 50% of the main residence relief that you have built up? Surely this is a game-changer?

No. Read my earlier post:

I remember purdyoaten and I came across this odd little amendment to section 222(7)TCGA 1992 made by section 24(10) FA 2020, which removes the risk pennywise refers to. There is a discussion of the point on another thread. That does not remove the risk referred to concerning the tax avoidance point, though.

Earlier thread here:

https://forums.moneysavingexpert.com/discussion/6229866/capital-gains-on-house-sale/p2

2lateagain

I looked at the example linked above. In our case, we're not seeking to gain a tax advantage over and above that which any married couple would have as a result of joint ownership, we simply (perhaps too simply) didn't realise the need to formalise that joint ownership - "with all my worldly goods I thee endow", and all that.