CGT, PPR and marriage - have I fallen into a bear trap?

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    CGT, PPR and marriage - have I fallen into a bear trap?

    I have owned a flat for 10 years that I rent out. I originally lived there for two years and went to live with my now husband in his house (in his sole name). I married my husband 5 years ago. I have two questions. If he transfers his house to our joint names but we sell that house in the distant future will I be entitled to full PPRR on my share by virtue of section 222(7) TCGA 1992? If so, does that mean I will lose my entitlement to PPRR on the rental flat (for the first two years, last three years, plus letting relief)? Or did I lose that anyway when I got married?

    #2
    I should clarify by asking in the case of the marital home whether there will be any CGT to pay at all by me.

    Comment


      #3
      A married couple can only have one PPR.

      There is a 2 year time limit to make an election/nomination between 2 (or more) residences - although the clock will be reset when a new combination occurs.

      A rented out property cannot normally qualify as a residence.

      The PPR relief on your flat is currently diminishing over time.

      If your husband transfers his house into joint names, whilst it is your main residence (seems likely), you will effectively "inherit" his base cost plus PPR position. If the property is mortgaged, there may be a liability for SDLT.

      Comment


        #4
        I understand that a married couple can only have one PPR. But the flat was my PPR for some of the time before i met and married my husband. It is no longer my PPR. But I thought I could still claim relief for the time I was there, plus the last 3 years and also letting relief for the period on between. Is that not correct (assuming there is no transfer of husband's house)? Why is my PPR diminishing?

        Secondly, assuming my above understanding is correct does the fact that I now benefit from PPRR in relation to my husband's house going back to the time he bought it ( which predates the purchase by me of my flat) mean that any small PPRR and letting relief I might otherwise be able to claim would no longer be claimable?

        Comment


          #5
          1. Yes, you can still claim exemption for those dates. But the PPR relief has to diminish the longer it ceases to qualify. Letting Relief may assist, but it's a maximum of £40,000 (per owner). The actual position will not be determined until disposal.

          2. There is no tax advantage from your husband's transfer, as it already has full PPR exemption. That could change if he decided to rent it out.

          Comment


            #6
            Would there be a tax disadvantage from the transfer though? Does the fact we would both get full PPRR on the house upon subsequent disposal not mean that I can't claim PPRR on the flat at all?

            Comment


              #7
              No - the PPR relief and Lettings Relief is safe. Section 222(1(a) TCGA 1992 refers to PPR "...at any time..".

              There should be no tax disadvantage for joint ownership, if SDLT is not an issue.

              Comment


                #8
                The reason I was worried was that s 222(7) refers to taking account of periods of the original owner for PPRR as if it was also the transferee's PPR - which sort of sounds like there are two PPRs, albeit retrospectively...

                Comment


                  #9
                  This applies only to married couples (and Civil Partners). It would be different if the inter-spousal transfer (assuming they were not permanently separated)was done when the property was NOT the PPR - then only the base cost is "inherited".

                  Comment


                    #10
                    Yes, buy we are a married couple.

                    Comment


                      #11
                      When you dispose of the renal property you will be granted PPR for the period you actually lived there and the last 36 months. Letting Relief may clear a lot of any CGT liability.
                      There are no tax implications for you or your husband by adding you to the deeds as long as any mortgage is not twice the SDLT threshold.
                      Regards Peter

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