Capital gains tax and transferring property ownership

jimmo

Keep_pedalling said:

Transferring 100% would pass the entire CG to your wife as she is deemed to have obtained it at the cost of your original purchase. If she never lived in the property then I don’t think she can claim residential relief on what ever share you give her.

As you already appear to have a buyer lined up HMRC may see this as a gift of the proceeds rather than the property itself.

That went out in 2020. The wife will almost certainly now inherit the relief.
CG64925 - Capital Gains Manual - HMRC internal manual - GOV.UK (www.gov.uk)

[Deleted User]

jimmo said:

Keep_pedalling said:

Transferring 100% would pass the entire CG to your wife as she is deemed to have obtained it at the cost of your original purchase. If she never lived in the property then I don’t think she can claim residential relief on what ever share you give her.

As you already appear to have a buyer lined up HMRC may see this as a gift of the proceeds rather than the property itself.

That went out in 2020. The wife will almost certainly now inherit the relief.
CG64925 - Capital Gains Manual - HMRC internal manual - GOV.UK (www.gov.uk)

Time to bow to superior up to date  knowledge. We will not discuss the timing of the transfer!

how_do_i?

[Deleted User] said:

how_do_i? said:

Right this is sooooo over complicated!!!

Just been back on to .gov site to do the calculator with the following scenario:

100% gifted to wife - Result -No tax to pay

Calculated for wife answering the questions:

Received from spouse as gift valued at £105K
Sold for £105K
No tax to pay.

No mention of original price I paid.  No mention of when gift occurred.  Nothing.

Help!!!!!

No. Transferring it to your wife has no effect on you. Your wife now owns the property. Her purchase cost is now what YOU paid for it NOT 150k! BUT she is entitled to NO relief for it being her private residence.

It is simply a calculator. No reliefs, legislation, time apportionment rules are built in. 

Thank you for your help clarifying this.  I am slowly getting my head around it.

It is not very practical that the .gov calculator spts out inaccurate information encouraging me to apply the rule in a way they do not want me too!! Ridiculous.

So if 50% gifted I would calculate as follows:

Initial purchase £15.5K  (7.75K each even though she didn't purchase it)
Half each for purchase costs.
Sold for £105K (52.5K each)
Half each of sale costs

Excluding the sale cost rough calculation as follows:

Her gain 100% of 52.5 - 7.75 = £44.75K - 12K allowance x 18% = £589 (approx values used)

My gain with PRR of approx 54%  = (52.5 - 7.75) x 0.54 = 24K gain - 12K allowance = 12k x 18% = £216 (again approx values)

Is this presenting it correctly?

Is there also indexation to consider?

TIA

[Deleted User]

how_do_i? said:

purdyoaten2 said:

how_do_i? said:

Right this is sooooo over complicated!!!

Just been back on to .gov site to do the calculator with the following scenario:

100% gifted to wife - Result -No tax to pay

Calculated for wife answering the questions:

Received from spouse as gift valued at £105K
Sold for £105K
No tax to pay.

No mention of original price I paid.  No mention of when gift occurred.  Nothing.

Help!!!!!

No. Transferring it to your wife has no effect on you. Your wife now owns the property. Her purchase cost is now what YOU paid for it NOT 150k! BUT she is entitled to NO relief for it being her private residence.

It is simply a calculator. No reliefs, legislation, time apportionment rules are built in. 

Thank you for your help clarifying this.  I am slowly getting my head around it.

It is not very practical that the .gov calculator spts out inaccurate information encouraging me to apply the rule in a way they do not want me too!! Ridiculous.

So if 50% gifted I would calculate as follows:

Initial purchase £15.5K  (7.75K each even though she didn't purchase it)
Half each for purchase costs.
Sold for £105K (52.5K each)
Half each of sale costs

Excluding the sale cost rough calculation as follows:

Her gain 100% of 52.5 - 7.75 = £44.75K - 12K allowance x 18% = £589 (approx values used)

My gain with PRR of approx 54%  = (52.5 - 7.75) x 0.54 = 24K gain - 12K allowance = 12k x 18% = £216 (again approx values)

Is this presenting it correctly?

Is there also indexation to consider?

TIA

Indexation is long gone. However you should revert to jimmo’s post regarding the recent change in legislation. As a former HMRC specialist in CGT I would be taking his word for it. However, as he knows, I stand my ground on the potential challenge by HMRC on the transfer.

PS - I think that you need to check your 18% calculations on both eg 18% of 12000 is 2160!

Jeremy535897

Sorry to make life even more confusing, but two previous posters appear to have overlooked the amendment to section 222(7) TCGA 1992 by section 24(2)(b)(ii) FA 2020, which removes the issue of losing main residence relief for transfers of properties that were, but are not currently, the main residence of the transferor.

The basic answer is that if you give half the property to your wife, sufficiently in advance of a disposal to avoid the "Ramsay" principle, the overall gain is the same as if you just kept and sold it yourself, but divided equally between you (so potentially using two annual exemptions and perhaps reducing the tax rate).

If tax is payable the gain needs to be reported and the tax paid within 60 days of completion:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

I think you may have calculated the gain on the exempt period in your OP, rather than the chargeable period.

jimmo

[Deleted User] said:

jimmo said:

Keep_pedalling said:

Transferring 100% would pass the entire CG to your wife as she is deemed to have obtained it at the cost of your original purchase. If she never lived in the property then I don’t think she can claim residential relief on what ever share you give her.

As you already appear to have a buyer lined up HMRC may see this as a gift of the proceeds rather than the property itself.

That went out in 2020. The wife will almost certainly now inherit the relief.
CG64925 - Capital Gains Manual - HMRC internal manual - GOV.UK (www.gov.uk)

Time to bow to superior up to date  knowledge. We will not discuss the timing of the transfer!

That's something I learned on here, courtesy of Jeremy I believe. Having retired over 16 years ago, my knowledge is most certainly not up to date.

how_do_i?

ooops some decimal place errors there!!

£5890 and £2160

[Deleted User]

Jeremy535897 said:

Sorry to make life even more confusing, but two previous posters appear to have overlooked the amendment to section 222(7) TCGA 1992 by section 24(2)(b)(ii) FA 2020, which removes the issue of losing main residence relief for transfers of properties that were, but are not currently, the main residence of the transferor.

The basic answer is that if you give half the property to your wife, sufficiently in advance of a disposal to avoid the "Ramsay" principle, the overall gain is the same as if you just kept and sold it yourself, but divided equally between you (so potentially using two annual exemptions and perhaps reducing the tax rate).

If tax is payable the gain needs to be reported and the tax paid within 60 days of completion:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

I think you may have calculated the gain on the exempt period in your OP, rather than the chargeable period.

Yes Jeremy - you are clearly more up to date that I - complete news to me. 

It does appear that the op is simply going to ignore the pitfalls of the Ramsay principle and take his chances.

how_do_i?

so it looks like i am better off applying my PRR to 100% of the gain.  There doesnt appear to be an advantage in using my wifes allowance due to lack of PRR.

105k - 15.5k = 89.5K x 0.54 PRR = 48.33K - 12k allowance = 36.33 x  0.18 =  £6539  compared to 5890 + 2160 = £8050 if its 50 50 using both allowances.

Is this broadly correct (now decimal points sorted!!)

how_do_i?

[Deleted User] said:

Jeremy535897 said:

Sorry to make life even more confusing, but two previous posters appear to have overlooked the amendment to section 222(7) TCGA 1992 by section 24(2)(b)(ii) FA 2020, which removes the issue of losing main residence relief for transfers of properties that were, but are not currently, the main residence of the transferor.

The basic answer is that if you give half the property to your wife, sufficiently in advance of a disposal to avoid the "Ramsay" principle, the overall gain is the same as if you just kept and sold it yourself, but divided equally between you (so potentially using two annual exemptions and perhaps reducing the tax rate).

If tax is payable the gain needs to be reported and the tax paid within 60 days of completion:
https://www.gov.uk/capital-gains-tax/report-and-pay-capital-gains-tax

I think you may have calculated the gain on the exempt period in your OP, rather than the chargeable period.

Yes Jeremy - you are clearly more up to date that I - complete news to me. 

It does appear that the op is simply going to ignore the pitfalls of the Ramsay principle and take his chances.

No intention to avoid pitfalls.  Posting as trying to do it correctly.  Without breaking any laws just taking advantage of anything that is put there to take advantage of and do it correctly!