CGT on property sale when it has already been paid by one party

askingforafriend2021

My friend and his ex jointly owned an investment property, when they split his ex transferred their share to him. CGT was paid by the ex (it's a significant gain as was owned over a number of years and no spousal exemption) on the share transferred to him based on half the purchase value and half the current value of the property at the time.

His accountant has now said if he sells the property his CGT liability would be calculated on the original purchase value and then the full value of the property when he sells (so essentially twice what the ex paid when they disposed of their half)

Say the CGT was £50k for whole property when valued for ex to dispose of share

Ex paid £25k CGT for the value of their half when transferred

Accountant is saying when he sells as he now owns the whole property he must pay CGT £50k

It's not sitting right it's that figure as it seems like too much will be paid overall? Should his CGT calculation be £25k to the point of transfer then on any increase after the date of transfer? Or should it be calculated from the value from date he became owner of the whole property?

Any help appreciated, Google doesn't seem to be helpful for this particular scenario!

Jeremy535897

His base cost is the value agreed for the ex's half of the property when calculating the gain on the gift, plus his half of the original cost.

[Deleted User]

The accountant is wrong- is he treating the transfer as if they were still married?
Jeremy is, of course, correct. Another way of showing the disposal ( and I have generally done it this way when preparing a return) is to show two separate disposals of each half share.

a) Half share at outset -  50% of sale price less 50% of original cost (the cost used by ex when working out the gain on transferring) less 50% of purchase fees.

b) Half share acquired from ex - 50% of sale price less transfer value used by ex less sale fees. 

The total of a) and b) is the gain before exemption of 12300.

It is incorrect to be splitting gains in the manner suggested.

askingforafriend2021

Thank you both that makes so much more sense! 

Don't suppose there's any articles or references or is it just a case of really a good accountant should know this?
Thanks again

[Deleted User]

askingforafriend2021 said:

Thank you both that makes so much more sense! 

Don't suppose there's any articles or references or is it just a case of really a good accountant should know this?
Thanks again

Any accountant with a reasonable tax knowledge should know this. If they don’t I would be seeking one who did. You are the person who is seeking advice but yet have managed to work out that Capital Gains would be paid twice on half of the property which is more than can be said for your friend’s accountant.

Jeremy535897

See https://www.gov.uk/government/publications/relief-for-gifts-and-similar-transactions-hs295-self-assessment-helpsheet/hs295-relief-for-gifts-and-similar-transactions-2020

It describes where you can reduce the tax if there is a gift, but as the gift in your case met none of the conditions, market value is used and capital gains tax is payable, as you said happened.