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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15942
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wife and I bought a house with a joint mortgage in Aug 2005

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My wife and I bought a house with a joint mortgage in Aug 2005 near to my work place which we lived in as our principal residence until Sept 2009. We also bought a retirement home in May 2005 which we gutted and renovated from 2005 until Sept 2009 whenwe moved into as our main home on my retirement. The house we had lived in from 2005 until 2009 was then transferred solely into my wife's name as she was a non tax payer and rented out with rental income going into her own bank account until Jan 2016 when the house was sold to our sitting tenants being transferred into my name just prior to exchange of contracts. There was a capital gain of £34,500 on the property over the period 2005 to 2016 after deducting allowable costs. My question is other than my personal annual capital gains allowance can I claim for the period I had lived in the property from 2005 to 2009 given ownership had changed hands to my wife for tax purposes during the rental period. I am currently a 40% tax payer and will be investing the capital gain into an EIS investment but would like to establish my capital gain exposure on the sale.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Was the house still under a rental agreement when it was transferred from your wife to you?
Customer: replied 1 year ago.
yes technically I suppose it was as the tenant had paid her rent up to the completion date although she and her legal representatives knew the property would be in my sole name and not my wife's at point of contract exchange.
Expert:  TonyTax replied 1 year ago.
Thanks. It makes a difference. You will get main residence relief for the period of your ownership from August 2005 to September 2009. You will get letting relief if the property was let during your sole ownership of it and that could significantly reduce the gain subject to CGT. You'll get main residence relief for the period the property was your main home and for the last 18 months of ownership. If you claim it, letting relief will be the lesser of £40,000, the sum of the gains for the period of occupation and for the last 18 months of ownership and the gain for that part of the letting period not covered by the last 18 months of ownership. Take a look at Example 9 here for an illustration: https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief If you invest in an EIS, you can defer a capital gain until the shares you invest in are sold. Look here for more information: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323732/hs297.pdf I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Would it be possible to claim the main residence relief and letting relief in my wife's name only given she was initially a joint owner through the period of sole residency then subsequently sole letting owner up to the point of sale. Although the property was in my sole name just prior to exchange of contract does she retain a beneficial interest to allow this to happen. Sale funds were paid into our joint bank account.
Expert:  TonyTax replied 1 year ago.
Whose names were on the title deeds at the point of sale?
Customer: replied 1 year ago.
Mine
Expert:  TonyTax replied 1 year ago.
The disposal is yours for CGT purposes.
Customer: replied 1 year ago.
Thanks, ***** ***** question on this subject then is although the rental contract and subsequent income for the past six years was in my wife's name as she was sole owner on the land registry deeds for this period, as the registered owner of the property at date of sale Am I able to claim the six years of rental relief on top of my 4 years of residential relief when it was our main residence.
Expert:  TonyTax replied 1 year ago.
As the property was not transferred back to you by your wife during a period when it was your main home, you cannot inherit her main residence relief or letting relief. Your gain is based on a number of months of ownership and you cannot include the period between September 2009 and January 2016 as you didn't own the property. Had your wife transferred the property back you whilst it was your main home, you would have had your period of ownership backdated to September 2009 so that your tax situation mirrored your wife's and you would have got the main residence relief and letting relief that she would have qualified for had she sold it whilst it was in her name. Having considered this further, the fact is you disposed of the property to your wife in September 2009 and the paper gain you made was tax free due to the property having been your main home. Therefore, I now think you won't get any reliefs other than the annual CGT exemption as your period of ownership started afresh from January 2016 and ended very quickly. Take a look at CG64950 for the HMRC view on this.
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