CGT and IHT

[nma]

I am considering purchasing a second property in joint ownership with my wife. I already own a property outright in joint ownership with my sister (this was purchased in Sep 1998). This property constituted our main residence until Dec 2002. It is now empty and we wish to hold it as an investment property (through student lettings).

My questions are:

What are the CGT and IHT liabilities should I proceed to purchase a second property with my wife (as main residence).

Is it possible to purchase a second property in my wife's name to minimise CGT?

What are the CGT consequences should my sister wish to buy a second property?

Is it better to sell the property prior to purchasing a home with my wife?

Thanks in advance.

[Tax Accountant]

I assume that the property owned with your sister has been the only or main residence from the date of purchase in Sept.1998 to Dec.2002 of both you and your sister. This period plus the final 3 years will be considered to be exempt for CGT. Any other period will be considered to be chargeable. All gains are time-apportioned between exempt and chargeable periods. Gains apportioned to chargeable periods will be further reduced by upto £40,000 lettings relief for each joint owner. Any balance is reduced by taper relief and annual exemption. Any balance is charged to CGT in the year of disposal.

It is not necessary to sell this property for at least 3 years, but significantly longer due to lettings and other reliefs, after stopping to use it as your only or main residence.

How and whose name you buy the new property does not affect your CGT position on the above property.

If you buy another property with your wife, and use this as your new residence, this property will be exempt from CGT. If you subsequently stop using it as your only or main residence before selling, you may have to pay CGT on some of the gains.