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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I am trying to minimise capital gains tax on buy to let

Customer Question

Hi I am trying to minimise capital gains tax on buy to let property owned for 3yrs in my name. I plan to sell it soon. I did not apply to flip it to my main home within 2 year cut off. So looks like I will have to pay CGT when I sell. Minus £40k letting relief. However can I transfer property to my wife then she could apply to flip the property to her main residence then she could sell it. Therefore she could get the last three years as exempt from CGT? Or does the three years only start from the time the property is in her name.? Alternatively should we consider moving into the property to make it our main residence before we sell to get the 3 year exemption.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

You won't qualify for letting relief unless the property has been your main residence at some point during your ownership.

A married couple can only have one main residence between them so transferring the property to your wife won't work.

The only way to avoid CGT, but not necessarily altogether as that would depend on the facts and figures, would be to move into the property for a period of time before you sell it. There is no set period and you will read on some websites that a few days or months is sufficient time to qualify for the last three years of ownership relief. However, I would say that you need to live in it for a year at least and even then the tax office may question your motivation for moving into it with a view to disallowing the claim for main residence and letting relief on the basis that you had no intention of making the property your home and that you moved into it simply to try to avoid tax. You would need to show that you had moved your "life" to that property, if asked.

You could minimise the potential CGT liability by putting the property into joint names which will at least give you two CGT exemptions of £10,900. In addition, if you did live in the property and claimed main residence relief, you would also qualify for two lots of letting relief subject to HMRC not querying it.

There is, of course, no guarantee that the tax office would query a claim for main residence relief but the shorter the period of occupation the greater the chance that questions will be asked.

Take a look at HS283, here and here for more information.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 3 years ago.
Hi again.

I can see that you have read my answer to your question. Please let me know if you need further clarification. If not, would you kindly rate my answer so that I get paid for my work. Thanks.
Customer: replied 3 years ago.
Hello. Thank you for your reply.

Currently our main home is in my name and also the second home. Can you please clarify if I transfer the second home to my wife. Does she have 2 years to elect it as our main residence?

In hindsight, Would it have been correct for me to elect the second home as our principle private residence when I bought it, even though we did not move there, then elect our current home as our main residence a few months later to lock in the 3 yr PPR allowance on the second property?

Regards
Expert:  TonyTax replied 3 years ago.
A married couple can only have one main residence between them. Transferring the second to her will not open that door I'm afraid.

You cannot elect for a second home to be your main home unless you live in it at some point and when it is let, it cannot by definition be your main home.
Expert:  TonyTax replied 3 years ago.
Hi again.

I can see that you have read my answer to your question. Let me know if you need further clarification. If you don't would you kindly rate my answer so that I get paid for my work. Thanks.

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