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TonyTax
TonyTax, Tax Consultant
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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In the event of a relationship breakdown (Cohabitation) - would

Resolved Question:

In the event of a relationship breakdown (Cohabitation) - would any lump sum paid to one party to purchase a property be liable for income tax?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Could you elaborate on the circumstances a little more please. Is the property concerned a main home for one or both of the individuals?
Customer: replied 2 years ago.

Yes the property to be purchased would be for the main home for one of the individuals. The other individual would stay in their current home.

Expert:  TonyTax replied 2 years ago.
Thanks.

Assuming that the individuals were not married or in a civil partnership, then the one who is selling their interest in the property may have to pay CGT. That would depend on whether it was ever their main home which I would have thought it was at some point which would exempt some of the gain from tax, for how long that was, how long they owned a share of it and how much the gain is.

Take a look at HS283 for information on the main home and CGT. If the share is being sold at a discount to the real market value, HMRC may impose market value as the transaction won't be one being made "at arms length", ie between two people who don't know each other.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

The primary home will not be sold - the individual has enough money to pay their ex partner a lump sum to buy a separate property - my question was whether the ex partner would be liable to pay income tax on the lump sum offered to purchase a new place to live.

Expert:  TonyTax replied 2 years ago.
This type of payment won't be liable to income tax.

If the payment has no conditions attached, ie giving up a share in a jointly owned property for a lump sum payment, then there will be no CGT to pay either. The payment will simply be a gift which will not be taxable on the recipient.
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