Optimise Accountants -

Selling, transferring properties and Tax Planning – Part 4 of 5

September 18, 2013

Posted by Simon Misiewicz on 18th September 2013

Selling, transferring properties and Tax Planning – Part 4 of 5

Are you looking to sell properties in the future?

Are you thinking about passing your property onto a loved one?

  1. Selling Properties As A One Off & Capital Gains Tax (CGT)
  2. Selling properties as a trade (Income tax V Corporation tax)
  3. Using trusts and inheritance tax planning
  4. Transferring assets between spouses
  5. Residency / Domicile – UK & International tax

So without delay let us get into Part 4

Transferring assets between spouses

Albeit when marriages are formed, in the eyes of the newlyweds and the law everything becomes equal.

However, HMRC take a different view.

If you transfer an asset between spouses and married couples then the deemed transfer is at market value (1). You should therefore not assume that the properties that are purchased in separate names automatically become equal share by getting together.

The transfer between spouses should also be considered to be bona fide and at arms length. You are therefore advised to get a true RIC valuation when transferring between one another.

If the beneficial ownership of an asset is divided other than equally between the couple and the split of the beneficial ownership of both the asset and the income from it is identical, the couple can make a declaration under ICTA88/S282B on form 17 stating what that split is (2).

Couples that split / divorce

There are going to be times when couples move on with their lives separately from their partner. From the perspective of tax there is a separation and a value needs to be given to the transfer, just as you would legally (3). The difference is timing. If the title deeds clearly show a change of ownership then CGT will apply at the point of transfer for the market value.

If the couple and agree to split the proceeds of sale even after separation; it is the date that the title deeds change to the new owner rather than the date and market value at separation.

Example

For example, B is married to and living with C. He transfers an asset to her and Section 58 applies. They divorce and C marries and lives with D. She transfers the asset on to him and Section 58 again applies.

They divorce and D enters into a civil partnership with and lives with E. He transfers the asset on to him and once again Section 58 applies. E sells it and his gain is computed on the basis that the cost of the asset is the deemed consideration paid to D on transfer.

Dependent families and house ownership

There are going to be times when properties are bought and sold between dependent family members. Unlike a BTL we can still claim a deduction of CGT via Private Residence Relief (PPR) for properties between dependent family members.

Example:

In January 1983 a husband buys a house which is occupied from that date as the sole residence of his widowed mother. In January 1984 his wife buys a house which is occupied as the sole residence of her aged father. In January 1988, following the death of her father, the wife’s house is sold. Relief is claimed and will exempt the whole of the gain.

In January 1990 the husband’s mother dies and his house is sold in January 1992. His period of ownership is 9 years. His mother occupied the house as a dependent relative for 7 years of which 4 years cannot be claimed because relief has been given to his wife. So relief is available for the remaining 3 years of the husband’s mother’s occupation, 1983, 1988 and 1989, together with the final 2 years of ownership (in accordance with TCGA 1992 section 223(1), and 5/9 of the gain on disposal is relieved.

For more information please contact us on 0115 946 1991 or Click Here To Email

References:

(1) CG10790 – Persons chargeable: husband and wife or civil partners: dealt with separately

(2) CG22020 – Transfer of assets: husband and wife or civil partners: jointly held assets

(3) CG22202 – Transfer of assets: between husband and wife or between civil partners living together: year of separation

(4) CG22227 – Transfer of assets: between husband and wife or between civil partners: living together: more than one transfer

(5) CG65590 – Private residence relief: dependent relative: husband and wife and civil partners



Get your FREE ebook "Property Investors Guide"
Enter your information to recieve the eBook

First Name:*
Last Name:*
Lead Source:*
Email:*
Phone:*

Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk