CGT husband->wife->other


T

TonyJeffs

Suppose I buy a property, and over 2 years it increases in value by 100k.
Then I give half to my wife,
Then she sells her half to a stranger,
Who pays CGT on the profit, me or my wife?

thanks
Tony
 
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D

Doug Ramage

TonyJeffs said:
Suppose I buy a property, and over 2 years it increases in value by 100k.
Then I give half to my wife,
Then she sells her half to a stranger,
Who pays CGT on the profit, me or my wife?

thanks
Tony
Her share, her profit, her CGT bill.

But the gain would be calculated at your purchase price, not the market
value at date of transfer to your wife.

But how would you like to own 50% of a property (and share 50% of any
income) with a stranger who may be able to force a sale of the whole
property?
 
R

robertmlaws

Perhaps the OP is trying to reduce his CGT bill when selling his (non
PPR) house to the stranger. Perhaps he is considering giving half to
his wife and then both of them selling their halves to the (same)
stranger at the same time, thus making use of both their CGT
allowances.
I''m not sure this would wash with the inland revenue.


Robert
 
R

Ronald Raygun

Perhaps the OP is trying to reduce his CGT bill when selling his (non
PPR) house to the stranger. Perhaps he is considering giving half to
his wife and then both of them selling their halves to the (same)
stranger at the same time, thus making use of both their CGT
allowances.
And not only that, but potentially it makes better use of tax bands
where a smaller amount of the combined taxable gain would be charged
at the higher rate, if at least one of them is not already a HRTP.
I''m not sure this would wash with the inland revenue.
But it does. Becasue it's the law.
 
D

Doug Ramage

Perhaps the OP is trying to reduce his CGT bill when selling his (non
PPR) house to the stranger. Perhaps he is considering giving half to
his wife and then both of them selling their halves to the (same)
stranger at the same time, thus making use of both their CGT
allowances.
I''m not sure this would wash with the inland revenue.


Robert
You may be correct.

Part transfer to spouse, followed by sale of both parts should not be a
problem to the IR - unless the transferee's share of the sale proceeds ended
up in the transferor's bank account.
 
R

Ronald Raygun

Doug said:
You may be correct.

Part transfer to spouse, followed by sale of both parts should not be a
problem to the IR - unless the transferee's share of the sale proceeds
ended up in the transferor's bank account.
Why would it matter if it did? Since inter-spouse transfers are
exempt, why should not the transferee be allowed subsequently to
transfer their share of the proceeds back to the original transferor?
 
D

Doug Ramage

Ronald Raygun said:
Why would it matter if it did? Since inter-spouse transfers are
exempt, why should not the transferee be allowed subsequently to
transfer their share of the proceeds back to the original transferor?
'Cos it could throw suspicion on the earlier "gift" not being genuine.
 
R

Ronald Raygun

Doug said:
'Cos it could throw suspicion on the earlier "gift" not being genuine.
Why would that matter? The rules don't exempt "genuine gifts", they exempt
"transfers", don't they?. Where in the rules does it say that to qualify
transfers must be genuine gifts, and not be subsequently reversed, and that
it is unacceptable for a spouse to agree willingly to give the other the
benefit of their CGT allowance?

For IHT purposes gifts need to be genuine to become PETs (but that's
not normally relevant for inter-spousal transfers anyway), but for CGT
purposes, which is what we're talking about here, I'm not aware of any
such restriction.
 
D

Doug Ramage

Ronald Raygun said:
Why would that matter? The rules don't exempt "genuine gifts", they
exempt
"transfers", don't they?. Where in the rules does it say that to qualify
transfers must be genuine gifts, and not be subsequently reversed, and
that
it is unacceptable for a spouse to agree willingly to give the other the
benefit of their CGT allowance?
A transfer could be the result of a gift or a sale. The legislation does not
need to qualify it further, if no beneficial interest was transferred, then
there was no "transfer".
For IHT purposes gifts need to be genuine to become PETs (but that's
not normally relevant for inter-spousal transfers anyway), but for CGT
purposes, which is what we're talking about here, I'm not aware of any
such restriction.
The IR disagree (although that does not make them correct), and their CGT
Manual alerts Tax Inspectors to this point.

Normal advice (and it would be mine) would be to keep the interval between
the spousal transfer and disposal as long as possible, and any proceeds to
be retained in the donee spouse's bank account.
 
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T

Tim

Normal advice ... would be ...
... any proceeds to be retained in
the donee spouse's bank account.
OK then - what if the spouses have only a *joint* bank a/c?
 
R

Ronald Raygun

Doug said:
I advise the donee spouse to open his/her own account.
Why? Keeping the proceeds in a joint account is surely a good
indicator that the sale was intended to be of a jointly owned
asset jointly liquidated, and therefore that the use of two CGT
exemptions was entirely right and proper.

What part of the actual statute involved (TCGA?) is so ambiguous,
do you think, that IR could seek to interpret it in a way which
seems so obviously at odds with what any right-thinking person
would assume the intention of the legislators to have been?
 
D

Doug Ramage

Ronald Raygun said:
Why? Keeping the proceeds in a joint account is surely a good
indicator that the sale was intended to be of a jointly owned
asset jointly liquidated, and therefore that the use of two CGT
exemptions was entirely right and proper.
I don't agree. I consider it safer to keep each share of the sale proceeds
separate.
What part of the actual statute involved (TCGA?) is so ambiguous,
do you think, that IR could seek to interpret it in a way which
seems so obviously at odds with what any right-thinking person
would assume the intention of the legislators to have been?
None. It is the individual(s) who may be attempting to subvert the purpose
of the legislation.
 
R

Ronald Raygun

Doug said:
None. It is the individual(s) who may be attempting to subvert the
purpose of the legislation.
In what way? The legislation as good as says that it's OK to
transfer assets freely between spouses (and therefore shares in
them, bringing a sole asset into joint ownership or vice versa)
without realising gains or losses, and also that it's OK to use
both spouses' annual CGT exemptions when disposing of a joint
asset, does it not? To all intents and purposes, to do this sort
of thing is not exploiting an unintentional loophole, it is doing
exactly what the legislation is for. This isn't subversion.
 
D

Doug Ramage

Ronald Raygun said:
In what way? The legislation as good as says that it's OK to
transfer assets freely between spouses (and therefore shares in
them, bringing a sole asset into joint ownership or vice versa)
without realising gains or losses, and also that it's OK to use
both spouses' annual CGT exemptions when disposing of a joint
asset, does it not? To all intents and purposes, to do this sort
of thing is not exploiting an unintentional loophole, it is doing
exactly what the legislation is for. This isn't subversion.
That is not in dispute for singly owned assets becoming joint assets. What
the legislation is not meant to do is facilitate is the utilisation of 2 x
tax reliefs and tax band(s) where the reality is that one spouse only is
disposing of his/her asset.
 
R

Ronald Raygun

Doug said:
That is not in dispute for singly owned assets becoming joint assets. What
the legislation is not meant to do is facilitate is the utilisation of 2 x
tax reliefs and tax band(s) where the reality is that one spouse only is
disposing of his/her asset.
What has established that this is not what the legislation is meant to do?

Although IR might frown upon it, is it OK by law for one spouse by way of
gift to make the co-spouse part-owner of an asset virtually immediately
prior to its sale to a third party, if the intention is for the sale
proceeds to become joint property?

If so, what is wrong with the co-spouse subsequently gifting back their
share to the original spouse?

Even if there are separate bank accounts, what's to stop the wife writing
the husband a cheque, or buying him a Ferrari?
 
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D

Doug Ramage

Ronald Raygun said:
What has established that this is not what the legislation is meant to do?
I am not sure if there is a court case on this point. As already posted, the
IR consider that it's ineffective for CGT purposes. IMHO, they may well be
correct. Since the Ramsay decision, courts had tended not to look that
favourably on avoidance schemes.
Although IR might frown upon it, is it OK by law for one spouse by way of
gift to make the co-spouse part-owner of an asset virtually immediately
prior to its sale to a third party, if the intention is for the sale
proceeds to become joint property?
Yes.

If so, what is wrong with the co-spouse subsequently gifting back their
share to the original spouse?
Nothing, in theory. But this comes back to my original point of the raising
the possiblity of a pre-ordained scheme.
Even if there are separate bank accounts, what's to stop the wife writing
the husband a cheque, or buying him a Ferrari?
Nothing - but it does not assist in persuading the IR (or the Court) that
this is a genuine joint transaction.
 

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