Tax question

[odecar]

In process of purchasing a property at a discount and likely to sell quickly as the rental market will not stack up in the area.

Property bought using my income as the basis.

However my better half is not a taxpayer so will do a 50-50 purchase as there will be some capital gains tax to pay.

Question for the tax knowledgeable.

Is it possible to have it all transferred into my wife name post purchase to minimise tax or is there no benefit to doing this ?

[plym77]

Hi Odecar

Transfers of assets between a married couple are at no gain/no loss. The transferee spouse inherits the transferor spouse reliefs, ownership periods etc so this is some of the most commonly used tax planning.

Remember that you should not necessarily transfer the whole of the property - ensure that if unutilised elsewhere, that each spouse retains enough to cover their CGT annual exemptions (and possibly other exemptions - particularly if the property has been a PPR and also rented at some point - a quirk in the legislation means that higher letting reliefs can often be claimed - up to an additional £40k, depending on individual circumstances).

I expect that the property is currently in your own name, with the mortgage in your name? Not an issue, you can change the underlying beneficial ownership of a property by Declaration of Trust (prepared by a solicitor at a cost in the region of £200 plus VAT). A D of T will mean that you can change the ownership without informing Land Registry and there is no legal requirement (caveat - in my understanding) to inform the mortgage company if you do it this way.

HOWEVER - your transaction is in danger of being a trading profit. You are purchasing the property with a view to makind a profit, as opposed to holding the investment longer term. This is trade and and therefore income not capital. This is not necessarily a bad thing as there are things you can claim as a business rather than capital disposal (or partnership or limited company - each have thier merits), however, you will not get any CGT reliefs.

However, if you can argue that you purchased the property for long term investment, but this has not worked out then you may be able to argue a capital disposal.

Revenue v Capital is always a mirky one. Generally, if someone does this 'one off' then they are more likely to be able to argue that the transaction if capital not trade. However, if you intend to do this regularly then this is almost certainly trade - if this is the case then you would need to look at the best tax structure to have in place to deal with these transactions - the structure depending on a nuber of factors.

If you are looking for specific advice and calculation (whether the CGT ownership proportions, or something larger scale like a trade), please do feel free to email me to discuss this further.

In the meantime, I hope this helps.

Regards

Sherena