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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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I am currently separated from my partner (but not yet divorced).

Customer Question

I am currently separated from my partner (but not yet divorced). We are in a same sex marriage. We were married in Jan 2015, but had a civil ceremony back in 20005. We just upgraded.
The question I have is that currently we own two properties. Both held in joint names. Property 1 (Court Tree Drive) and Property 2 (Baneberry Walk). Property 1 is worth 400k Property 2 300k. Both have outstanding mortgages on them.
The plan is that we will divorce but have not yet started proceedings. I will take ownership of Property 1 (own in my sole name) and remove my partner. I won't live in this property as it is currently being rented out. I am currently remortgaging Property 1 and will via a transfer of equity pay my partner 40k. This wil be use to remove me from the mortgage on Property 2 which my partner will retain in their sole name and I will be removed. I will then purchase myself a new flat using equity released from Property 1 (around 22k).
What I need to know is, would either of us be liable for capital gains tax on this transaction ?
Submitted: 10 months ago.
Category: Tax
Expert:  TonyTax replied 10 months ago.
Hi. Can you tell me when you separated please.
Customer: replied 10 months ago.
We seperated in November 2015
Expert:  TonyTax replied 10 months ago.
Thanks. So long as you swap your interests in the properties by the end of the tax year during which you separated, then the transfers will be treated as having been done on a "no gain, no loss basis" by reason your marriage. Such transfers are exempt for those who are married or in civil partnerships. If you don't swap your interests by the end of the tax year during which you separated, you can each make a claim under Section 248A to 248E of Taxation of Chargeable Gains Act 1992 so that your interests can be exchanged tax free. You can read about that here: https://www.taxinsider.co.uk/381-Splitting_Land_or_Property.html http://www.hmrc.gov.uk/manuals/cgmanual/cg73000+.htm As there will be a cash exchange, there may be a CGT liability on the cash element. The gain would depend on the cost of the property. I hope this helps but let me know if you have any further questions.
Customer: replied 10 months ago.
HiAs per your statement below."As there will be a cash exchange, there may be a CGT liability on the cash element. The gain would depend on the cost of the property."Need to know if there is CGT to pay for the 62k we are taking out of Property 1. Purchased property 1 for £291k back in 2010 and Property 2 for £265k in June 2015.Please advise.m
Expert:  TonyTax replied 10 months ago.
Not if the exchange can be done by 5 April 2016.
Customer: replied 10 months ago.
Why is the 62k not subject to CGT then ?
Expert:  TonyTax replied 10 months ago.
Because you are married. Transfers of assets between married couples or those in civil partnerships are exempt from CGT. However, in the case of a separation, the transfer must be done by the end of the tax year during which the separation took place in circumstances which are likely to remain permanent.
Customer: replied 10 months ago.
Final question. Would I have to declare anything on my 2015 / 16 tax return around capital gains ?
Expert:  TonyTax replied 10 months ago.
Strictly, the disposal of an interest in a property by one party of a marriage to another should be disclosed in a tax return on a "no gain, no loss" basis but many people don't because they don't know that they should, especially if they don't normally complete tax returns.
Customer: replied 10 months ago.
Ok. I do complete a return so would need to detail.
Expert:  TonyTax replied 10 months ago.
It's just a formality.
Expert:  TonyTax replied 10 months ago.
Hi.
I'm just following up to find out if my answer helped or if you have any further questions.

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