Ben, thank you for your patience.
Your question is "If we sold our current property and moved back into the initial property, would we avoid capital gains tax? If not, what would our tax position be? Should we transfer the house into both our names?"
Even if you were to sell your initial property now, you would avoid capital gains tax as all gain would be covered by private residence relief and letting relief.
Your potential gain at present is around £158k. It was your main residence until 2010 as you bought another place in 2011. This period of 10 years would qualify for private residence relief. The last 18 months of ownership would alo qualify for additional relief whether you stayed in the house or not.
You would also qualify for letting relief to a maximum of £40k.
Based on the above reliefs there would be no CGT payable.
You would certainly avoid CGT if you were to move back to initial property and make it your main residence again. You could make it a joint property if you wish. This would certainly mitigate CGT if at a later date you wished to move out into another residence and let this one once again.
More information on private residence relief can be found here
I hope this is helpful and answers your question.
If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.