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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3829
Experience:  FCCA FCMA CGMA ACIS
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Myself and wife own a house as tenants in common vale of house 220k her 50%==110k we are

Customer Question

myself and wife own a house as tenants in common vale of house 220k her 50%==110k
we are divorcing and she is willing to transfer her part of the house to me, however she has not lived here for several years, we are still married, is cgt payable on the transfer?
if so to reduce it she is willing to transfer 10% of her share ----i.e 11000 in value to each of my children, she is step mom ! and i seem to be having problems doing the maths 10% of her share to each kid -- works out at 5% of the house value?
Submitted: 1 year ago.
Category: Tax
Customer: replied 1 year ago.
i am basic rate tax payer if cgt is applied.
Customer: replied 1 year ago.
we are divorcing without any court finance order
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Here is the advice from Taxation [edited]: 'The no gain/no loss capital gains tax transfer rule [ie inter spousal transfers] applies in the year of separation, but not beyond that year. Should a transfer take place after 5 April following separation but before divorce, the transfer is deemed to take place at market value because the couple are still connected and may result in a chargeable gain.' So it all depends upon the definition of separation. Her presence in the house is not necessarily the key; it is the marital status definition of separation which is. Gifting to children is a disposal and will immediately trigger a CGT position. Your computation of the proportion is correct. I do hope that my reply has been of assistance.
Customer: replied 1 year ago.
yes but the value will be under their cgt allowance?
Customer: replied 1 year ago.
do i wait for them --tax dept to chase me? or should i declare it, how will they decide what a separation is? - no legal separation has been applied
Customer: replied 1 year ago.
they are not her children -- can she not gift to anyone, as long as it is under their cgt allowance?
Expert:  bigduckontax replied 1 year ago.
It is not the recipient who is liable for cgt, but the donor and she may gift to anyone she likes. However, as she has an Annual Exempt Amount (AEA) of 11.1K this gift would just slip in under the wire. You have no liability in the situation set out in your original question and therefore nothing to declare.
Customer: replied 1 year ago.
yes but to 3 children, is that going to take her over her allowance ===33k
Expert:  bigduckontax replied 1 year ago.
Not if she does it in three successive tax years.
Customer: replied 1 year ago.
she is transferring something she owns to 3 people --for no money, and she is liable for tax? all needs to be done at the same time.
Expert:  bigduckontax replied 1 year ago.
Well she might be, but Private Residence Relief (PRR) might apply if the property remains her sole or main domestic residence. PRR relieves CGT at 100%. Otherwise the gain, not the value at current market value, would be taxed at 18% or 28% or a combination of the two rates depending on her income including the gain in the tax year of transfer.
Customer: replied 1 year ago.
so it makes no difference to the cgt whether she transfers the entire value of her 50% to me, or split it between me and the 3 kids? so the person who gets the gift/value is not liable for any cgt?
Expert:  bigduckontax replied 1 year ago.
The beneficiary is not liable for CGT in any way. It doesn't matter which way the disposal is arranged. Many people do not realise that when they sell their home there is a latent CGT liability because PRR, which is given automatically, relieves the tax at 100%.
Customer: replied 1 year ago.
so would PRR apply as it has been her main/only home for the last 18yrs, but has been living in her deceased mothers house, which she is now selling - intending to buy another house ----is the window closing --i.e before she buys a home
Expert:  bigduckontax replied 1 year ago.
It might, particularly if her deceased mother's house had not been willed to her. Alternatively if she did not elect to transfer PRR on moving.
Customer: replied 1 year ago.
well it was but between her and 2 brothers.she would not have elected to transfer PRR, except maybe on sale --which will occur in 2 months time
Expert:  bigduckontax replied 1 year ago.
Frankly it is all a bit nebulous giving her absence from the matital home. Of course if it comes to you it is an inter spousal transfer and outside the scope of UK taxation.
Customer: replied 1 year ago.
o.k so forget about the gifts to the kids, go for it and see what happens ----and in any case any tax liability comes back to her?
Expert:  bigduckontax replied 1 year ago.
Indeed.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.
Customer: replied 1 year ago.
thank you ----forgot to ask ---is it better to declare a payment for this transfer of her part of the house to me which has a value of 110k---say 25k from me to her, or just go for the straight gift no payment
Expert:  bigduckontax replied 1 year ago.
I suggest you leave it as a gift.

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