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Kasare
Kasare, Solicitor
Category: Family Law
Satisfied Customers: 204
Experience:  Solicitor, 10 yrs plus experience in civil litigation, employment and family law
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.My wife and I separated last July and we are trying

Customer Question

Hello.
My wife and I separated last July and we are trying to transfer property and cash assets before the 5 April deadline.
I am unclear about private residence relief. If my wife continues to live in the family home (which I intend her to own outright), can I maintain my share in the property through our joint tenancy (we have a mortgage) indefinitely until she sells the house -- and also maintain it as my PPR for CGT until she sells the property?
Is the situation changed if I move into another house that we currently rent out, providing I do not go to the effort to make that my PPR?
Thanks, Alastair
Submitted: 1 year ago.
Category: Family Law
Expert:  Clare replied 1 year ago.
Hi
Thank you for your question.
My name is Clare
I will do my best to help you but I need some further information first.
Could you explain a little more about the extent of the assets and what you wish to achieve please
Clare
Customer: replied 1 year ago.

Thank you, Clare.

I hope this is the detail you need.

There are three property assets, each currently held jointly:

1. Marital home, estimated value 800K

2. Rental property, estimated value £450K

3. Land purchased in 2013, estimated value 155K

I believe the marital home plus 5000 square meters of land surrounding it is excluded from the tax year deadline. Does one still have three years to sort out the marital home before CGT (UK) kicks in or has that changed?

We have asked lawyers to change my ownership of number 4 on the list, the land, into my wife's name 100%, and that is straightforward.

That leaves us with the rental property, but here is where things get complicated. We raised a mortgage on the marital home for the purpose of buying the rental property. So, if we divide the houses (marital home to my wife, rental property to me) we have some issues that I would like to understand. That is the purpose of this enquiry:

1. If we divide ownership of the properties as described, we have some mortgage redemption penalties. £2k for penalty of early redemption (which would have dropped to £1K May 2015 and go to zero in May 2016), £2K for a new buy-to-let mortgage on the property until October when the tenants there leave and I move in, say £1K for the buy-to-let redemption in October, and £1K for a new mortgage for him as a resident in the house in October. So, a total of £6K costs.

Obviously, we'd like to avoid some of these costs. The solution would seem to be for me to maintain my interest in the family home at 50:50, declaring it still as my primary residence since I haven't moved into permanent accommodation (I rent a flat currently), thereby allowing us to maintain the current mortgage on the marital home and avoid all this refinancing in the short term.

Declaring the marital home as my primary residence would also ensure that when my wife sold it, she would not pay the full whack of US CGT on the property (she is a US citizen).

I am worried that the HMRC will levy CGT on my share of the marital home at the time of its sale (because I would be maintaining an interest but not living there). However, it seems that my PPR is still the marital home for a period of time. The question is, how long? If I maintain my 50% interest in the property until it is sold, can I claim PRR and can I avoid my wife paying CGT on the "gift" of my 50% share, given that it falls outside the 5 April deadline for making transfers under the "no loss no gain" rule?

Many thanks indeed,

Alastair

Expert:  Clare replied 1 year ago.
Hi
For clarity - is there any reason why your ex is not willing to remain on the mortgage of the rental property in the same way that you are remaining on the mortgage of the matrimonial home?
Clare
Customer: replied 1 year ago.

Ah, sorry. The rental property does not have a mortgage. We own it outright. The mortgage is on the marital home (and I will pay the mortgage, either out of rental funds, or from my own salary.

Expert:  Clare replied 1 year ago.
Hi
So the only property that has to remain in joint names is the matrimonial home?
Clare
Customer: replied 1 year ago.

Yes, that is correct.

Although if necessary, I'm happy to transfer the matrimonial home 100% into my wife's name now, rather than at a later stage or upon its sale.

If I transfer 100% now, then I have to remortgage the rental property (doable but incurring costs); if I transfer later or upon sale, then those costs go down substantially.

Alastair

Expert:  Clare replied 1 year ago.
Hi
How will the equity in the Matrimonial Home be divided between you?
Clare
Customer: replied 1 year ago.
Well initially as 50/50 (as it stands at the moment), but the intention is that I transfer my share of the matrimonial home to my wife. I could transfer my share immediately if needs be.
Expert:  Clare replied 1 year ago.
Hi
How much is the outstanding mortgage on the Matrimonial Home and how long have you been living together?
Clare
Customer: replied 1 year ago.

The outstanding mortgage is £110k. We lived together for 24.5 years up until July 2014

Expert:  Clare replied 1 year ago.
Hi
So for clarity your wife will receive assets worth£845K and you will receive £450K?
Clare

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