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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15976
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi. Im stressed and worried :( My wife and I separated 9

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Hi. I'm stressed and worried :(
My wife and I separated 9 years ago. There was no paperwork.
She kept the house and still lives in it with the kids.
The house has always been in joint names (and still is).
I bought a flat and have lived in it for the last 9 years.
The flat has also always been in joint names.
(The main reason for this was, I thought it would be easier if anything happened
to me, then the flat would automatically go to her and the children). I would like to move to a newer flat but am worried my separated
wife will have to pay Capital Gains tax since..
the flat value has increased from £180k to £240k in the last 9 years
and she doesn't live there and can't claim primary residence relief but is a joint

I know morally we should not be taxed on this move, since she will not benefit a penny from this move, but will HRMC stick to the letter of the law and demand payment ?

How do we make sure no CGT tax is paid when I move ?


When you bought the flat, did you make an election for one of the two properties to be treated as your main home for tax purposes?
Customer: replied 4 years ago.



No. No election was made.


To be honest I'm not au fait with tax matters so it wouldn't have even occurred to us.


Now, I can see all this could have been avoided if we put the house in her name and the flat in mine when we separated.



Leave this with me while I draft my answer.

Hi again.

I'm afraid that there may be nothing you can do to avoid your wife having a CGT liability on her share of the gain (but see below). I have to say it is unusual for a husband who has moved out of the marital home to buy another property in joint names with his wife from whom he is separated.

The gain will be £60,000 less the expenses of buying and selling (legal fees, survey fees, selling agent fees, stamp duty etc.). That's £30,000 for each of you and your wife. If you sell after 5 April 2014, the first £11,000 of her share of the gain will be exempt so that will leave her with a net taxable gain of £19,000. Your share of the gain will be exempt.

There are two rates of CGT, 18% and 28%. The rate or combination if rates that your wife will pay will be dependent on the level of her income in the tax year of disposal of the property. So, the CGT could be anywhere between £3,420 and £5,320.

Since you haven't made an election, you are going to face a similar problem if and when the property your wife lives in is sold, only this time it will be you with the CGT liability.

There may, however, be light at the end of the tunnel. There is a piece of legislation, Section 248A to 248E Taxation of Chargeable Gains Act 1992, whereby two joint owners of two properties who live in one or the other can give up their interest in the property they don't live in and claim relief from CGT so long as no money changes hands. This may be a problem where the properties concerned have differing levels of equity.

You can read about the relief here, here, here and here. I've not read anything to suggest that separated couples cannot benefit from this relief (asset exchanges following the end of the tax year in which separation occurs are usually done at market value for CGT purposes) and CG65160 alludes to that but I would suggest you consult a tax lawyer who specialises in marital law for clarification. There may also be a relief available if you actually divorce and an exchange of assets occurs as part of the financial settlement. Stamp Duty may be a problem if any cash does change hands.

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

Customer: replied 4 years ago.



Thank you, XXXXX XXXXX be very useful information :)


Can I ask, if we wanted to do the swap do we have to do anything other than use a conveyancer to change the titles ?


Do I need to contact HMRC ? fill in any forms etc ?



You should probably have a solicitor do the paperwork for the swap. I'm not aware of anything else you need to do legally.

You would each need to tell HMRC of the swap through a tax return and a letter to make the claim for the relief. You can also claim the relief in the tax return.
Customer: replied 4 years ago.


Thank you.


Is a conveyancor adequate to do the swap paperwork ?


My wife doesn't fill in a tax-return, will she have to to declare this transaction ?


You say "make a claim for the relief". Does this mean the money will be taken up front and we claim it back ?

Or the tax return is just a declaration of historical activity to tidy up the tax situation ?



I'm not a legal expert so I cannot answer that I'm afraid.

The disposal of a property or a share in one has to be declared so your wife will need to complete a tax return.

A claim for relief does not means you pay tax and then get it back. It means you tell HMRC why no tax is payable and which part of the law backs you up. I would still suggest you consult a lawyer who is an expert on marital law and tax to have your situation looked at.
Customer: replied 4 years ago.

Thank you very much. You have been very helpful :)

Thanks and good luck.
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