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familylawexpert, Family Solicitor
Category: Family Law
Satisfied Customers: 311
Experience:  Substantial experience (14yrs +) in divorce, financial cases, cohabitation, pre-nuptial agreements and civil partnerships.
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My husband and I are separating. We own the house we live in

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My husband and I are separating. We own the house we live in ( which is also a business run as a camp site) and a house run as a holiday let. Both properties are owned 35% each by my husband and I and 30% by my daughter who lives with us. My daughter and I want to stay in our house and continue running the camp site and my husband wants to live in the house we previously used as a holiday let. So we want to transfer assets so that my daughter exchanges her share of the holiday house for my husbands share of our current home. Part of my share in the holiday house could also be transferred to my husband to balance any discrepancy in the value of the 2 properties. Could you advise me whether this would generate any capital gains tax. Many hanks, Viv Seears

My name is Mac. I can help you with your question.

Transfers between spouses in the tax year of separation are not treated by the Inland Revenue as a disposal that triggers a capital gains tax disposal. So if you can show the Inland Revenue that you separated after 6th April 2014, then you have until 5th April 2015 to effect those arrangements between the two of you (but it's obviously best not to leave it till the last day, for practical reasons...).

The above arrangement does not apply to an exchange between your daughter and your husband, which would be a capital gains tax disposal. It would be sensible therefore to use the lowest reasonably possible values you could for those transfers (in the tax returns, but bearing in mind that they need to be capable of being proved to the Inland Revenue if the tax return is assessed).

I hope that is helpful.
Customer: replied 3 years ago.
Thanks for your reply but could you please clarify. Are you saying that my daughter would have to pay capital gains tax on the transfer even though she is not actually gaining anything?
I would recommend that you take specialist tax advice when completing your tax return, but I was looking at a very similar scenario only earlier this year. My understanding is that the Inland Revenue will treat the transfer by your daughter of her share of the holiday home as a disposal at notionally market value (of her share) and trigger a capital gains tax charge accordingly.

Of course, it may be possible to minimise that CGT in all the normal ways, eg by any capital expenditure made by your daughter while she held it, and perhaps a percentage reduction on value to reflect her minority interest (which is not worth as much as a majority interest). There may able be some business property relief. However, it remains a transfer for capital gains tax.

She does not pay capital gains upon receiving an asset (no-one does). She would then hold her share of the home for as long as she wishes.
Customer: replied 3 years ago.
Sorry but I still don't understand how this works. My daughter would not be receiving anything, she would be giving a share of our holiday let to my husband for nothing. She has not received a share of the profits from the holiday home although she has done a lot of the work. In fact over the last few years she has done virtually everything as my husband was not able or did not want to contribute,. So she would be paying capital gains tax on something which has not benefitted her in any way but has cost her a lot in time and labour.
Also,I also don't understand your last paragraph. As she is not receiving anything what does this refer to. I would be exchanging my share of the holiday home for my husbands share of the home we live in but my daughter would not be receiving anything. Sorry but I find this very hard to understand.
I'm sorry that I haven't made myself clear.

If I own an asset (say a rental flat), and it increases in value during the time that I own it, and I give it to someone else for free, that will still be a capital gains tax event - even though I don't get anything for it. I will be taxed on the difference between it's market value and the value it had when I acquired it.

That is more or less the position your daughter is in.

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