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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My daughter and husband are divorcing. The house is in both

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My daughter and husband are divorcing. The house is in both their names. He is keeping the house and paying her two lump sums - one now and then £69000 on or before 1/9/2016. It has been suggested that she might have to pay Capital Gains Tax on this second lump sum as that house will no longer be her principal dwelling. Is this accurate?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me if your daughter and her husband are living apart and if so, how long that has been the case. Why is the payment being made in two separate sums?
Customer: replied 2 years ago.

My daughter moved out two weeks ago. The payment is being made in two parts because he claims he cannot get that amount of money yet and does not want to re-mortgage the house. The house at present is fully paid for.

Expert:  TonyTax replied 2 years ago.
Thanks.

So long as your daughter sells her share of the property to her husband within 18 months of moving out and the property has been her main home from the date of purchase until 2 weeks ago, she will not have to pay Capital Gains Tax. This is because the owner of a property who has moved out is always given a maximum of the last 18 months of ownership of a property which has been their main home as an exempt period, even though they were not living there. It allows people to move home without necessarily having sold their previous home without having to worry about CGT for a further 18 months, during which time they may sell it.

Assuming the sale actually takes place by 5 April 2016, the end of the tax year in which your daugher and her husband separated, any gain would be exempt from CGT as transfers or sales of assets between married couples in the tax year of separation are exempt from CGT under the "no gain, no loss" rules.

Even if your daughter didn't sell her share of the home beyond the 18 month period, she may be able to make an election under Section 225 TCGA 1992 to avoid having to pay CGT. Take a look under the heading "Matrimonial or civil partnership home" here for more information on a Section 225 election.

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