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bigduckontax
bigduckontax, Accountant
Category: Tax
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Experience:  FCCA FCMA CGMA ACIS
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I have just gotten divorced and have two houses but I now have

Customer Question

I have just gotten divorced and have two houses but I now have to sell and split the proceeds. Both are rented out as I am in the army. I have one house which I paid 205k for but am selling for 190k. the second which we lived in for 6 months prior to being posted abroad was brought for 98k but is selling for 145k. do I need to pay anything in tax?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

Please advise the date you bought the house?

Please advise in whose name(s) these houses are held? ie are they joint tenancies eg with your ex
Customer: replied 2 years ago.

both houses are in both names. the house selling for 145k was brought in 2002 and the house selling for 190k was brought in 2007

Expert:  bigduckontax replied 2 years ago.
Please verify that because of your military service you were living in job related accommodation?

You are actually conversing with an ex AGC(SPS) (and RAPC) Major!
Customer: replied 2 years ago.

I brought a house in Portsmouth while serving on thorny island. we lived in it for 6 months as my wife got a job at the Portsmouth branch of zurich ins, we also just wanted to get on the property ladder. later that year I was sent to Germany and from there on my artificers course in bordon. I have rented it out since.

Expert:  bigduckontax replied 2 years ago.
I am sorry to be so pedantic, but you have not confirmed that whilst in Germany and Bordon you lived in job related accommodation. This data is of critical importance to my answer.

I appreciate as an ex military man that you almost certainly lived in quarters or the Mess, but I have to know for certain. I served at Longmoor for a time so know the location well; Germany, no; I was essentially a UK serving animal; I did a mere 2 weeks there at what was then HQ BAOR!
Customer: replied 2 years ago.

please don't apologise. I was in SFA while serving. have been separated for 3 years so the last 3 I have ben in the mess. Its a good tennis final by the way

Expert:  bigduckontax replied 2 years ago.

Thank you for that information, we can now proceed!

 

Here is the HMRC guidance on spouses and Capital Gains Tax (CGT):

 

'You may be entitled to Private Residence Relief on any gain arising on the disposal of your only or main residence. You and your spouse or civil partner cannot have more than one residence or main residence between you for the purposes of the relief at any time while you are living together. (You are treated as living together unless you are separated under a court order or by Deed of Separation, or are otherwise separated in such circumstances that the separation is likely to become permanent.)'

 

Now for one of your houses you will definitely be liable to CGT on disposal. The other may well obtain a modicum of relief as time spent in job related accommodation extends any period of Private Residence Relief (PRR).

 

Assuming that you made no election as to which dwelling is the be your sole of main domestic residence within two years of the acquisition of the second house then HMRC will base the decision on the facts available. The house upon which you made the loss is clearly one you don't want for PRR, but it does create a capital loss of 15K [half each] in your books. You should declare the loss on disposal in your next annual self assessment tax return to carry forward for future use.

 

The other residence should escape CGT altogether on the following grounds. You are entitled to PRR for the period of occupation plus any absences caused by your work and living in job related accommodation. Finally the last 18 months of ownership do not count at all so, as I say, you should escape scot free.

 

However, in your position I should be inclined to retain the solicitor who handles the conveyancing of these properties with a view to his negotiating your property transactions and CGT with HMRC.

 

I do hope I have helped with your problem with this brief canter through CGT, a highly complex tax..

bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3371
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.
Thank you for your help. After reading your answer I have contacted the solicitor but they do not deal with CGT. I have since spoken to a CTA and all is good. Thanks for your help.
Expert:  bigduckontax replied 2 years ago.
Delighted to have been of assistance. I merely mentioned the solicitor out of politeness, but other professionals in the field will suffice.

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