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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I have owned a freehold property consisting of 2 self contained

Customer Question

I have owned a freehold property consisting of 2 self contained flats for some 25 years. The property is registered in my sole name and I propose selling it. My question to you is-would I reduce the Capital Gains liability if I first transfer a half share to my wife so that she also gets an exemption allowance and reduced rate reliefs possibly. Her income is very low. We are both well over 70.
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.

Hi.

There is nothing to stop you putting the proeprties into joint names before you sell them to utilise both your CGT exemtions and a possible reduced rate of CGT which you would need to work out in advance to be sure. Take a look here for more information. HMRC have conformed in the recent past that they will not attack such tax planning exercises whereas in the past, there has been some doubt.

You need to make sure that if there are any mortgages on the properties that the amount of mortgage effectively being transferred to your wife does not exceed £125,000 in order to avoid stamp duty. Take a look here for more information.

I hope this helps but let me know if you have any further questions.





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Customer: replied 3 years ago.

Thank you. If I do give half of the property to my wife,do I understand you to say that she will be able to deduct half of the base costs from its value and then to get capital gains tax and reduced rate relief on the remainingp profit. I, on the other hand, will pay Capital Gains Tax on the other half i.e. half the realised profit less half the base costs?

Expert:  TonyTax replied 3 years ago.

If you put the property into joint names, your wife will take half your cost as hers so in effect the gain will be split on a 50:50 basis. You will each have an identical gain.

Your wife's CGT liability will be calculated based on her income level and your CGT liability will be based on your income level.

My answers are based on the assumption that neither of the flats has ever been your main home.

Customer: replied 3 years ago.


I refer to your reply dated14th July. Would it be sufficient if I gave my wife a letter confirming that half the Freehold property now belongs to her. The rents collected have always paid into a Joint account. On the other hand I have declared the whole of the property income in my tax return. Would it be sufficient to declare in our respective Tax Returns theshare of Capital Gains Profit and clearly stating that it is only 50% of the whole.

Expert:  TonyTax replied 3 years ago.
You really need to have your wife's name on the property deeds to convince the tax office that it is either jointly owned or owned by your wife before you sell it. Read the notes here for more information.

It doesn't matter whose bank account the rental income has been credited to. What matters is beneficial ownership.
Customer: replied 3 years ago.


Since I propose to sell the property,the lawyers advise that a transfer toJoint Ownership would cause legal complications as the purchasers lawyers could raise enquiries and require indemnities. They suggest that I execute a Deed of Trust which does not have to be registered but would show good evidence of intent. Do you agree?

Expert:  TonyTax replied 3 years ago.
That should work.

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