CGT Again- Need advice Urgent

[Confused69]

The situation is I jointly own 2 property's one is my PPR the other was empty and under repair for about 6-7 yrs (lack of money to do up) But 3yrs ago this April My husband and I seperated and he moved into the property making it his home. We have decided to finally start divorce proceedings and he wants to live in the family home and I have agreed to have the other property (The values are about the same apprx (£95,000). The second property cost £25,000 to purchase. If this is now to become my PPR as part of the divorce settlement, will I have to incur CGT when I sell it, I may only live there for less than 12 months but lack of finances mean I can't afford to purchase anything else at moment and this has no mortgage. Any help or advice please.
Thank you

[Jacka]

This may help:
http://www.landregistry.gov.uk/assets/library/documents/public_guide_004.pdf

It's not exactly what you need but may serve to give you some pointers.

[stephenp]

From the info you have given it is unlikely that you will have to pay any CGT at all, if the property is worth say 100K when you come to sell in in 12 months time, your gain on the property will be 100-25 = 75K / 2 = 37.5, providing you owned the property equally. as you have lived in the property for 1 of the 4 years of ownership you will be entitled to 4years PPR relief, hence no gain. you partner may be liable to CGT as he has never lived in the property.

hope this helps

[Confused69]

Thank you for replying, I will look into this a little further. Thanks

[Tax Accountant]

The situation is I jointly own 2 property's one is my PPR the other was empty and under repair for about 6-7 yrs (lack of money to do up) But 3yrs ago this April My husband and I seperated and he moved into the property making it his home. We have decided to finally start divorce proceedings and he wants to live in the family home and I have agreed to have the other property (The values are about the same apprx (£95,000). The second property cost £25,000 to purchase. If this is now to become my PPR as part of the divorce settlement, will I have to incur CGT when I sell it, I may only live there for less than 12 months but lack of finances mean I can't afford to purchase anything else at moment and this has no mortgage. Any help or advice please.
Thank you

There are many angles to this query.

(1) As far as tax matters are concerned, you are no longer to be treated as husband and wife since you separated approx 3 years ago in circumstances likely to result in the separation becoming permanent. This means that each one of you are allowed one PPR each (as opposed to only one PPR between a married couple living together as husband and wife). So, this is to your advantage.

(2) The position regarding the family property is as follows: It has been your only or main residence throughout and therefore there is no CGT upon transferring your share in this property to your husband.

However, it has not been used as your husband's only or main residence during the past 3 years. This gap will need to be considered by him if and when he comes around to selling the property in the future.

(3) The position regarding the second property is as follows: It is not clear when this was purchased. However, it has apparently been unoccupied for some 6-7 years (presumably since approx 1997 to approx April 2004. It has been your husband's PPR since April 2004 to-date. He is potentially exposed to CGT on part of the gain in respect of transfer of his half share to you. His gain is £70,000 x 1/2 share = £35,000. Approx 3/10ths is exempt as his PPR. This leaves some £24,500 gains chargeable. He will also benefit from Taper Relief of 35% x £24,500, leaving some £16,000. (Taper relief will be 40% if transferred after 6 April 2007). Deduct his CGT annual exemption of approx £9,000, leaving some £7,000 on which he will be charged CGT at 20% and/or 40% depending on how much falls in basic and higher rate bands.

The figures mentioned above may need to be fine tuned to take account of exact date of purchase, exact buying price, buying costs, improvement expenditure, indexation allowance from date of purchase to April 1998, and market value of the half share transferred to you.

When you come to sell it in the future, you may also have a CGT liability in respect of periods of ownership from date of purchase to date of sale but ignoring the final 3 years (inclusive of any period of actual occupation as PPR). Therefore, if the property was bought in 1997, occupied by you as PPR in 2007, and sold in 2008, you will have a CGT liability in respect of periods from 1997 to 2005.

I hope this helps.

Ramnik