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bigduckontax
bigduckontax, Accountant
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UK Capital gains tax - annual allowance query Dear Expert,

Customer Question

UK Capital gains tax - annual allowance query
Dear Expert,
Background - I am in the process of selling a jointly owned (of which I own 50%) buy to let property with a business partner. Although my name is ***** ***** the land registry title, I do have a 'deed of trust' confirming my 50% ownership of the property. We expect to exchange contracts in the next few days - taking us into the 15-16 tax year.
I wish to obviously make use of my personal CGT annual allowance (c. £11k) for the 15-16 year. But I was reflecting on the possibility of somehow using my spouse's unused annual CGT allowance for the 15-16 year.
Question 1- is it possible for me to draft a similar 'deed of trust' document for the property : (giving my wife 50% ownership of my 50 % ownership - so that me and my wife both owned 25 % each ) prior to exchange of contracts?
This would make use of my wife's annual CGT allowance of c. £11k.
Question 2 - is there any way I can make use of my unused annual CGT allowance for the year 14-15 (I think the answer is no - but no harm in asking you!)
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I'm Keith and happy to help you with your question.
Firstly, you have a slight error, your Annual Exempt Amount (AEA) for 15/16 is 11.1K. Secondly the AEA is an 'Use it or loose it' [HMRC speak] allowance. You cannot carry forward unused AEA from one year to the next.
It is possible to use a deed of trust to indicate that your wife has 50% of your property ownership, but I should warn you that HMRC will view it with a very jaundiced eye, it being so close to a disposal and consider it blatant tax avoidance. I would advise you not the attempt to prepare such a document yourself, but seek the guidance of a trusted, local professional in its drafting and execution and to negotiate with HMRC also. It may cost you a bit, but not nearly as much as a lost AEA should your home made document be defective or your negotiating skills not match those of taxman's.
I do hope that I have helped you with question and shown you a way forward.
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3119
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
Customer: replied 1 year ago.

Thanks for your response.

I have looked back through my records: the property was put on the market on 15.11.2014.

I also emailed my accountant for advice about this same issue I discussed with you on 31 Jan 2015 - but I did not receive a response. We had not received an offer on the property at this stage.

To help push through the sale , we reduced the price of the property from 300,000 to £280,000 in early Feb 2015 - subsequently receiving an offer.

Do these dates help my case in any way , or do you feel HMRC would still take a jaundiced view as I only sought advice from my accountant AFTER the property had been put on the market (though before we had received an offer?).

Thanks again.

Kuhan.

Expert:  bigduckontax replied 1 year ago.
Technically Kuhan, for CGT purposes the sale takes place on the exchange of contracts from which point you are contracted to sell. As this is unlikely to be achieved before the end on the 14/15 tax year it will fall in the 15/16 tax year where the AEA is 11.1K. If, by chance, it does fall in the 14/15 tax year the AEA is only 11K.
What you put it on the market for and when are an irrelevance, it is the agreed price at the exchange and on that date which triggers the CGT liability.
My sole worry is the deed of trust for your wife's 50% share being executed so close to the sale; bound to raise hackles at HMRC which is why I advised the use of an independent gent in the matter.
Customer: replied 1 year ago.

Understood. Thanks again for your advice.

Kind regards.

Kuhan.

Expert:  bigduckontax replied 1 year ago.
Delighted to have been of assistance, Kuhan.
Regards,
Keith.

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