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bigduckontax, Accountant
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Capital Gains Tax on 50% ownership of a property: Since July

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Capital Gains Tax on 50% ownership of a property:
Since July 2010 my sister and I have jointly owned a property, each with a share of 50%. For tax purposes the house is my sole residence and my sister's second home. In May 2014 we signed a Deed of Agreement whereby my sister is to transfer her share to me and I am to meet her CGT liability on the increase in value created by building work which I have funded during the period. I wish to offset 50% of costs incurred on capital enhancement against CGT.
The actual transfer date has not yet been agreed. Please would you advise on the correct date which will be taken by HMRC as the date of disposal for calculation of CGT. Verbal advice from HMRC stated that it would be the date of completion of legal documentation on actual transfer of ownership. In this case I would consider whether to delay the transfer in order to utilise 50% of any further capital allowances.
Conflicting advice received on my sister's side questions whether this would be possible "as where an asset is disposed of and acquired under contract the time of disposal and acquisition for CGT purposes is the time that the contract is made (see Simon's Taxes C1.104 etc)". I do not have access to Simon's Taxes.
Hello, I'm Keith and happy to help you with your question.
I have to concur with HMRC's opinion. When the property is transferred you sister will be liable to CGT on the property gain. That is 50% of the purchase price plus costs of purchase plus enhancements taken from 50% of the transfer value at current market price, less casts. She has an Annual Exempt Allowance of 11K to offset this gain.
The extract you have quoted from Simon's Taxes is usually only applicable where transfers are undertaken the same day. That is not the case here.
So sorry to have to rain on your parade. Always bear in mind Benjamin Franklin's dictum that in life there are but two certainties, death and taxes.
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