CGT for married couples

[johnnyBv8]

I'm in the process of selling a property and will have a CGT liability. I'm planning to transfer an ownership share to my wife prior to the sale completing (sale will be in this tax year before the allowances are cut). My question is whether it's best to do a 50:50 transfer, or to just transfer a % ownership equivalent to £12,300 of sale price, so that she doesn't need to submit anything, and I then declare my CG. Thanks

Edited by johnnyBv8 on Friday 10th February 16:12

[Eric Mc]

You may need legal advice to ensure the trans fare is legal.

[johnnyBv8]

Eric Mc said:

You may need legal advice to ensure the trans fare is legal.

Thanks - doing it through my solicitors and the legal bit is fine, it’s just the tax/split side I’m not sure on.

[The Leaper]

There are two HMRC reporting limits for CGT.

• If the CG exceeds the allowance of £12,300 it must be reported and the CGT paid,

and

• If the total proceeds of a sale exceed 4 times the allowance ie £49,200, which is quite likely in the case of a property sale, whatever the CG.

As a generality, both need to be borne in mind when calculating any CGT and reporting to HMRC.

R.

[ziontrain]

Don't forget, if it's a residential property you'll need to declare the sale and pay any tax due within 60 days of completion.

[johnnyBv8]

Thanks, it’s a lock-up, but I assume it classes as residential!

[MaxFromage]

johnnyBv8 said:

Thanks, it’s a lock-up, but I assume it classes as residential!

It can be residential or not, depending on it's current/former use. This definition applies to residents as well:

https://www.gov.uk/hmrc-internal-manuals/capital-g...

[Panamax]

johnnyBv8 said:

My question is whether it's best to do a 50:50 transfer, or to just transfer a % ownership equivalent to £12,300 of sale price, so that she doesn't need to declare anything, and I then declare 'my' %.

That's stretching tax avoidance to the limit and possibly beyond so don't be surprised if Mr HMRC decides to pop round for a chat. HMRC is well capable of checking the match between a buyer's SDLT return (Stamp Duty) and a seller's CGT return.

When deploying "husband and wife" avoidance it's best to,

• Do it across a sensible timescale, and
• Make sure the numbers don't match precisely.

The underlying point is that HMRC can cross out any intermediate step in a transaction that serves no real purpose and is introduced solely to avoid tax.

[johnnyBv8]

Panamax said:

johnnyBv8 said:

My question is whether it's best to do a 50:50 transfer, or to just transfer a % ownership equivalent to £12,300 of sale price, so that she doesn't need to declare anything, and I then declare 'my' %.

That's stretching tax avoidance to the limit and possibly beyond so don't be surprised if Mr HMRC decides to pop round for a chat. HMRC is well capable of checking the match between a buyer's SDLT return (Stamp Duty) and a seller's CGT return.

When deploying "husband and wife" avoidance it's best to,

• Do it across a sensible timescale, and
• Make sure the numbers don't match precisely.

The underlying point is that HMRC can cross out any intermediate step in a transaction that serves no real purpose and is introduced solely to avoid tax.

Ok, thanks for the heads up. I didn’t think there was any stretch involved though - it’s all within HMRC rules, husband and wife are treated as a single unit for the purposes of asset transfers, and there’s no requisite minimum period of ownership.

Edited by johnnyBv8 on Friday 10th February 14:48

[Panamax]

johnnyBv8 said:

Ok, thanks for the heads up. I didn’t think there was any stretch involved though - it’s all within HMRC rules, husband and wife are treated as a single unit for the purposes of asset transfers, and there’s no requisite minimum period of ownership.

Yes and no.

Yes - gifts to spouse free from CGT.
No - your proposal as described doesn't look much like a gift. It looks like an additional, unnecessary step in your sale to save tax.

It's that tricky area between "advantageous management of your financial affairs" and "taking the p155".

And, just checking, you may have scope to manage the overall tax payable if SWMBO is non-working? Potentially a significant slice at the lower rate.

Note: I believe your proposed gift of part of the property would need to be reported to HMRC under the "report and pay" rules if the property is residential.

[Panamax]

A further thought. What's she going to do with the proceeds of sale?

Gifts to spouse need to be "genuine, outright gifts". It won't help your cause if the cash makes its way back to you. Again, timing and amounts can be finessed to suppress any aroma of rodents.

[WindyCommon]

Errrr....

Your wife's gain will be calculated from the date she acquires her portion of the asset, not from the date you acquired the asset.

[WelshRich]

Many years ago (so the rules may have changed) I cashed in some share options that were liable for CGT. I was able to gift half of the proceeds to my wife post-sale so as to use her annual allowance. Tax office were perfectly happy with the arrangement…

You may be able to just sell the lock-up and then gift some of the proceeds to your wife, rather than gifting her a share of the property prior to sale.

As someone else has said, it had to be a genuine gift and as a result, my wife mainly spent it on shoes…

[johnnyBv8]

WindyCommon said:

Errrr....

Your wife's gain will be calculated from the date she acquires her portion of the asset, not from the date you acquired the asset.

Not sure what your point is here - that’s correct. She will’ve acquired her share at zero cost, so her part of the proceeds of sale will be declared for CGT.

[johnnyBv8]

Panamax said:

A further thought. What's she going to do with the proceeds of sale?

Gifts to spouse need to be "genuine, outright gifts". It won't help your cause if the cash makes its way back to you. Again, timing and amounts can be finessed to suppress any aroma of rodents.

Thanks and yes, that’s fine - a new car and the remainder into her savings!

[Alpinestars]

WindyCommon said:

Errrr....

Your wife's gain will be calculated from the date she acquires her portion of the asset, not from the date you acquired the asset.

Why? It’s a no gain loss transfer.

[Panamax]

WelshRich said:

my wife mainly spent it on shoes…

I feel your pain.