Tax Question

[NFC]

I hope someone can answer this for me. I have just sold a rental property. The contract was exchanged on the 13/04/06 and completion was on the 18/04/06, which falls in the tax year 2006 - 2007. CGT payable on this by 31/01/2008. My question is this, can I assign this to the tax year 2005 – 2006? I have another property to dispose of and I don’t want to have to sit on it for another year to be able to claim another £8800 CGT relief.
Thanks in advance.

[Tax Accountant]

I hope someone can answer this for me. I have just sold a rental property. The contract was exchanged on the 13/04/06 and completion was on the 18/04/06, which falls in the tax year 2006 - 2007. CGT payable on this by 31/01/2008. My question is this, can I assign this to the tax year 2005 – 2006? I have another property to dispose of and I don’t want to have to sit on it for another year to be able to claim another £8800 CGT relief.
Thanks in advance.

Sorry, what you propose is not possible. The disposal is in the tax year 2006-07 and you cannot change this. I suspect you already know this but are hoping against hope.

If you have any other assets standing at a loss, eg shares etc, you could consider realising losses on those to be able to set off against gains on the sale of the properties.

If you are married, you could transfer the second property to your wife and she could then sell it to a third party. She will then be able to use her annual allowance against the second property.

Ramnik

[NFC]

Thank you Ramnik. You are right I did suspect as much. Would the taxman accept a transfer to the wife, as it would be obvious to them that this would be for tax avoidance?

[Tax Accountant]

Hi,

All transfers between spouses are exempt for CGT purposes. Effectively, the acquiring spouse is deemed to have acquired the asset at the original date and cost of the transfering spouse, ie steps into his'her shoes for future CGT disposal.

So long as the sale has not been agreed with the third party, the tax office will not take any objection to this. This is not tax avoidance but tax mitigation. In any event, once the asset is transferred to your wife, nothing further on is certain. Your wife may decide to divorce you and keep the property or decide not to sell after all. Therefore, it is not certain that any tax has been saved or lost.

If you prefer, you could transfer it into your joint names if this works out better for you overall.

Ramnik