So there is no way of avoiding the payment of tax here? Problem is she wants to move so will lose £30K so not leaving enough for her to buy another house. She seems to think that as long as she has lived in the present house for 3 years then no CGT is payable?
Unfortunately Mark, no, as it is a second home. An election as to which home should be the recipient of PRR could have been made within 18 months of the axquisition of the second, but in its absence HMRC will base the decision on the facts. It is pretty clear that they will plump for the longer ownership period residence as the gain will be greater, thus favouring the Revenue.
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Apologies for the delay. Thanks for that. Final point is whether she could give me her half interest claiming some sort of holdover of tax on the gift and then in an entirely separate transaction I help her buy a house? In that way the tax is deferred until I sell (which would suit me) I can let the house out and she can move as she wishes to. Meanwhile the revenue will not lose out because I will pay CGT on any eventual sale based on the value of her half share at date of her acquisition ie half of 56K plus my gain based on the same figure.
Mark; Benjamin Franklin once sagely observed that in life there are but two certainties, death and taxes. If she gives you half of a landed property then as mere partners that counts as a disposal for CGT purposes. You cannot employ Holdover Relief as these are not business assets and in any event the relief is generally confined to property let out as holiday lettings although the Gov UK advice in this area is rather woolly. If you give her money to buy a house then you escape tax providing you survive seven years. The gift would create a Potentially Exempt Transfer (PET) in your estate for Inheritance Tax (IHT) purposes. PETs run off over seven years at a taper and in the event of your demise within the time limit are added back to your estate and are the first to suffer IHT. In the event of your estate being insufficient to meet the IHT then the liability cascades down to the beneficiary for immediate payment. The classic defence against a PET is a reducing term life insurance policy.