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CGT excemption advice needed please


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I have owned a buy to let property for 4 years. The tenant is about to move out and I am undecided what to do. I will have made a profit of approx. £40000 (and have a repayment mortgage) and am concerned about the amount of CGT I may have to pay if I decide to sell straight away. Can my partner 'buy-in' and become a shared owner before I sell and therefore allow us to gain his CGT exemption allowance? Or can he do this anyway if we decide to keep letting the property out and sell in a year or two's time?

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Are you married? If so, then simply transferring a share to your husband by Declaration of Trust (prepared by a solicitor) BEFORE exchange to sell, will enable the use of both CGT Annual Exemptions (providing they have not been used elsewhere). Your husband would take on your ownership history and as such would retain taper relief.

If you are not married, there is still planning you can do, but ordinarily you would need to span two tax years, transferring a share of the house to your partner pre 5 April 2008, and not exchanging to sell until after 5 April 2008. Please note that a transfer which is not spousal does not retain ownership history, however, this method would still ensure two Annual Exemptions are utilised.

From the point your partner owns a share of the property, he would be entitled to rental profits. This would follow the capital ownership proportions, unless you are married when it would be 50:50 on the income, irrespective of the capital ownership, unless you apply to H M Revenue and Customs to follow the capital ownership proportions.

The other alternative is if you are able to go and live in the property as your own home for a few weeks and elect it as your Principal Private Residence, then you could get PPR exemption on the last three years of ownership which would substantially reduce your tax liability, however, you must have quality of residence (furnished, utilities on etc)... so this may not be an option. If this option is feasable then consider it in more detail before making any decision. You cannot simply just elect an empty house as your PPR. Additionally, your own home would lose PPR exemption for the few weeks that your rental property is elected, although in reality when you do eventually sell your home, this minor period would ordinarily be covered by your CGT Annual Exemption and therefore probably wouldn't need further consideration.



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