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TonyTax
TonyTax, Tax Consultant
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I have been told that I will have to pay capital gains tax

Resolved Question:

I have been told that I will have to pay capital gains tax when I transfer the house we jointly own over to his name and he pays me out. Is this the case? n
I have never lived in the house as we bought it to renovate. We have been separated and living apart for more than a year.
Thanks
Submitted: 10 months ago.
Category: Tax
Expert:  TonyTax replied 10 months ago.

Hi.

Let me take a look at this and I'll get back to you in a bit.

Expert:  TonyTax replied 10 months ago.

You might refer to the notes here and here as part of this answer.

Transfers of assets between the parties to a marriage or a civil partnership are treated as taking place on a "no gain, no loss" basis so long as the couple are living together or the transfer takes place in the tax year of separation.

Since you have never lived in the property in question, the only relief that you are entitled to is the annual CGT exemption which covers the first £11,100 of gains you make in a tax year. As you are still "connected" to your husband for tax purposes, the disposal by you of your share of the house to him will be deemed to have taken place at the open market value. I suspect that he will pay you the market value of your share in any event.

Assuming that your share of the property is worth more than the sum of your share of the original purchase price and your share of the cost of renovations carried out, you will have a gain. If that is more than £11,100, you will pay CGT on the excess at 18% or 28% or a combination of the two rates depending on the level op your income in the tax year that the gain is made.

No more than £32,000 of the gain can be taxed at 18%. That figure will reduce by £1 for every £1 of income you have in excess of £11,000 in the tax year of the gain with each excess £1 being taxed at 28%, the higher CGT rate.

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

Customer: replied 10 months ago.
Hi Tony,Thank you for your prompt answer. Unfortunately my husband is only paying me £120,000 in total. 60,000 now and 60,000 within 5 years. We based the pay out on the price we bought the house at which is £610,000. His new mortgage company valued the house at £700,000 but HMRC said they would not accept that and we would have to have an estate agent valuation. I suspect that would be a minimum of £750,000, meaning the gain would be 140,000. I assume this would mean I have to pay CGT on 70,000. My husband is not intending to sell the house so the market value is theoretical.
Hope you can answer this?
Regards,Helen
Expert:  TonyTax replied 10 months ago.

Assuing that the £120,000 is not conditional, you will be treated as disposing of your share for full consideration at the time contracts are exchanged at the market value of that share at that time. You can apply to HMRC to pay the tax in instalments if you wish since you won't be receiving the payout in one instalment. Your gain would be £70,000 in this case.

You will be treated as having received market value for your share if the disposal occurs pre-divorce. For a disposal post-divorce, you will be treated as having received whatever price is agreed between you.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15886
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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