House swap

downshifted

Friends lived together many years, never married. Split up a few years ago, they own the house she lives in together and they bought together a cheaper flat that he lives in. Both properties are owned as joint tenants.They’re now ready to finalise the financial split.

What implications are there if they just transfer ownership of the flat entirely to him and the house entirely to her?

What implications are there if she gave him some additional cash, but not enough to represent the full value of his share of the house offset by the value of her share of the flat?

He is not particularly well (alcoholic) and they are currently making wills where he is still leaving everything to her. They’re amicable and still care about each other but cannot live together

They’re just looking to understand the implications for capital gains and inheritance tax purposes

Woodstok2000

Are they in a civil partnership?

Keep_pedalling

Assuming they were not in a civil partnership CGT can be avoided if they don’t use full market value for the transactions as they are not connected persons.

IHT could be an issue, what is the current value of the two properties?

poseidon1

https://forums.moneysavingexpert.com/discussion/6661692/house-swap

Assuming just friends without the benefit of a tax privileged civil partnership/ marriage they will likely each have stamp duty to contend with on an exchange ( see example link below), whilst the female will face a CGT liabilty on her transfer of her share of the flat , on the basis that it has never constituted her primary residence -

https://wsm.co.uk/blog/issues-with-stamp-duty-land-tax-sdlt-on-property-exchanges/

A conveyancing solicitor dealing with the legal side of the exchange is unlikely to have the requisite tax knowledge to advise, so they should consult a tax accountant in advance to assess the the SDLT/CGT liabilties likely to arise on the respective property valuations.

Worth noting that if the female does not give full value for the half share of the house by way of cash top up, the male is deemed to have gifted the deficit for IHT purposes. However he has no CGT exposure due to the house presumably being his primary residence prior to the parting of ways.

You have not mentioned any mortgages in place for either property, which could give rise to additional complications, separate from tax considerations.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/81941005#Comment_81941005

Plus are you aware of any significant savings, pensions etc that either has+ and any significant debts/mortgage.

The reason for asking, is that if the estate (s) are not big enough to attract IHT, then that effectively removes any IHT issues from the proposed transaction.

Jeremy535897

These may be relevant

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg73000

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg65155

downshifted

Thank you for all the replies, really helpful. They are not in a civil partnership. I don’t know the values of the properties but will talk to her. There are no mortgages. I know she has some savings and he does not. This will be really useful for her to consider.