How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask bigduckontax Your Own Question

bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3706
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

I am undergoing divorce proceedings. My wife wishes to

Customer Question

Hi, I am undergoing divorce proceedings. My wife wishes to retain the former matrimonial home which is in both our names and is valued at £382,250 after subtracting selling costs. I have lived away from this house for two years, my wife still lives there. We also jointly own some land valued at £127,000 after selling costs, my wife wishes to retain this too. I am a higher rate tax payer, my wife is a non tax payer. If my half of each of these properties is transferred to my wife as part of the divorce settlement, will I have to pay any capital gains tax on the transfers?
Submitted: 11 days ago.
Category: Tax
Expert:  bigduckontax replied 11 days ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

For the gain made on the land Capital Gains Tax (CGT) will certainly apply. Is the matrimonial home your sole or main domestic residence ie is it your only home?

Customer: replied 11 days ago.
It's the only house I own (jointly with wife) but I've not lived in it for two years, I'm living in rented accommodation until my divorce is completed.
How much will the CGT charge be for each property?
Expert:  bigduckontax replied 11 days ago.

You have an Annual Exempt Amount (AEA) of 11.3K to offset any gains. The gain on the land land will charged at 10% or 20% depending on the individuals' income including the gain in the tax year of sale. I cannot hazard a guess at this you have not disclosed the acquisition cost. As the matrimonial home is your sole or main domestic residence Private Residence Relief (PRR) will apply and that relieves CGT at 100%. PRR is given automatically.

Customer: replied 11 days ago.
The land (includes a barn) was purchased for £33,000 in 2002 but has had another £28,000 spent on it to convert it to an equestrian premises, so about £61,000 in total. It was valued in March 2015 at £130,000 and recently valued again at the same price. I have not used any of my CGT allowance. The house was also valued in March 2015 at £400,000 but was only £390,000 when recently valued. I read on the HMRC website that gifts to a spouse do attract CGT if we are separated and don't live together in this tax year, which is true, so does PRR apply? Does CGT apply to the difference between value now and acquisition cost or the difference between value now and value when we separated?
Expert:  bigduckontax replied 11 days ago.

Your gain on the land is 130K - 61K = 69K / 2 = 34.5K. Knock off the 11.3 AEA leaves 23.2K exposed to CGT at 20% = 4.64K tax due.

As the house is the only house you own Private Residence Relief (PRR) applies which relieves CGT at 100% when you dispose of your share.

Customer: replied 10 days ago.
As the house has devalued between the valuations can I use the loss on the house to offset the gain on the land/barn?
Expert:  bigduckontax replied 10 days ago.

If you make a capital loss on the house then you can use that loss to offset gains elsewhere or carry it forward.

Customer: replied 10 days ago.
Found this on a website 'From the end of the year of separation until the decree absolute, the former spouses or civil partners are still regarded as connected persons for CGT purposes, and therefore all transfers between them will be treated for tax as if made at full market value, even if no consideration changes hands.'
Don't really understand it but it does seem to be a partial alleviation from the normal CGT rules, can I use it in my case?
Expert:  bigduckontax replied 10 days ago.

No, because we are talking about the land which will always be subject to CGT irrespective of the marital status. However, the disposal price might reduce thus reducing the tax payable.

Customer: replied 9 days ago.
Tell me more about how the disposal price might reduce
Expert:  bigduckontax replied 9 days ago.

If the disposal price falls the gain is reduced also. Thus the tax burden is eased.

Customer: replied 8 days ago.
Going back to the statement I found on the HMRC website (question 13/06/2017 08:13), would that apply to a cash transfer from my wife to me as part of the divorce settlement? She needs to sell shares to raise enough cash, most of her shares are in an ISA so I suspect that she would have no CGT on them but some are not in ISA so I suspect that the gain on those would be subject to CGT.
Expert:  bigduckontax replied 8 days ago.

Yes, but remember she has an AEA also.

Customer: replied 6 days ago.
You said that I would not have any CGT to pay on the transfer of my share of the house to my wife due to PRR at 100% but I found this on a website 'You are entitled to the benefit of private residence exemption for the period that you have occupied the family home as your only or main residence. For this purpose you are deemed to have occupied it for the last 3 years of ownership irrespective of where you have lived.  If you have only lived in the property part of the time then the relief is reduced proportionately.
Expert:  bigduckontax replied 6 days ago.

Actually the extension period was reduced from three years to 18 months some years ago.

This interpretation of the law is incorrect. Whilst it remains the only house you own the PRR applies irrespective of occupation. The wording is 'sole or main domestic residence' although HMRC tend to interpret this as 'sole and main domestic residence.' This is incorrect and their interpretation has been defeated endlessly over nearly half a century.

Customer: replied 2 days ago.
Hi, thanks for advice so far. I am seeing an accountant tomorrow for some advice so might like to check some things with you after that.
Expert:  bigduckontax replied 2 days ago.

Delighted.

What Customers are Saying:

 
 
 
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
< Previous | Next >
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP
  • I couldn't be more satisfied! This is the site I will always come to when I need a second opinion. Justin
  • Just let me say that this encounter has been entirely professional and most helpful. I liked that I could ask additional questions and get answered in a very short turn around. Esther
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C.
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex
 
 
 

Meet The Experts:

 
 
 
  • Sam

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
< Previous | Next >
  • http://ww2.justanswer.co.uk/uploads/TA/Tax Expert/2013-8-21_231010_sam.64x64.jpg Sam's Avatar

    Sam

    Accountant

    Satisfied Customers:

    7088
    26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
  • http://ww2.justanswer.co.uk/uploads/BI/bigduckontax/2013-8-12_222058_1.64x64.jpg bigduckontax's Avatar

    bigduckontax

    Accountant

    Satisfied Customers:

    2333
    FCCA FCMA CGMA ACIS
  • http://ww2.justanswer.co.uk/uploads/TA/TaxRobin/2013-8-28_16186_femalebusinessprofessionalbinderhand11038485.64x64.jpg TaxRobin's Avatar

    TaxRobin

    Tax Consultant

    Satisfied Customers:

    524
    International tax
  • /img/opt/shirt.png taxadvisor.uk's Avatar

    taxadvisor.uk

    Chartered Certified Accountant

    Satisfied Customers:

    2845
    FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
  • http://ww2.justanswer.co.uk/uploads/MS/MsAM/2012-6-9_16426_anna.64x64.jpeg Anna's Avatar

    Anna

    Teacher, writer, biologist

    Satisfied Customers:

    270
    Great research skills, variety of work experiences, teaching experience.
  • http://ww2.justanswer.co.uk/uploads/PD/pdheslin/2012-6-6_232056_pambig.64x64.jpg pdheslin's Avatar

    pdheslin

    Consultant

    Satisfied Customers:

    51
    20+ years of internet site creation and search engine optimization. Dozens of search tools at my disposal.
 
 
 

Related Tax Questions