What happens when two people choose ways to part? Besides other emotional traumas, other parties often face financial conflicts. Many countries are subject to strict financial regulations. So it is often difficult to settle in one place. Some common questions include:
What if a house is a transfer between a spouse or between civil partners. Were these people living together at the time of divorce?
Whether by sale or by gift, the period of ownership of the transferee is treated by TCGA 1992 s222(7). (a) as beginning at the beginning of the period of ownership of the transferor. This also applies to if the house is transferred from one to the other on death.
When does the provision apply?
The provision applies to compute private house relief. There’s no effect on the computation of the gain. This is at the disposal by the transfer between the spouse or by the transferee civil partner.
Take care of the following conditions. Take a quick glance:
– The spouse or civil partners must be living together. And, the house must be their only or main house at the date of the transfer. If the house passes from one to the other on the death of either of them they must have been living together. And, the house must have been their only or main house. Before the death of the transferring spouse or civil partner
– the extended period of ownership is subject to the limit of TCGA 1992 s223(7). To compute the relief due to any later disposal.
Advantages of the transferee
In some situations. The extended ownership period will not be the advantage of the transferee.
Ann and Andrew were a married couple and lived together in a house which Ann purchased in March 1990. Although for the first five years of her own the house rented to tenants. When Ann died the house passed to Andrew, who continued to occupy it as his only house until he sold it.
If Andrew was able to account for the period he owned the house. Then private house relief would be available for this whole period. But, he needs to consider the ‘extended ownership period’ from March 1990 to the date he sold the house. During this extended ownership period. The house rented to tenants which means that the private house relief will.
Example 2
Bob and Brenda each owned a house when they married on 1 March 1995. After they married they nominated Brenda’s house to be their main house as of 1 March 1995. Brenda purchased the house on 1 September 1990.
Brenda died on 1 February 2015 and her house between spouses at a probate value of £400,000. Bob moved out of the house on 1 February 2015. And moved into his other house which he still owned and this other house became his main house. -The former main house remained empty until it on 1 January 2019 for £380,000.
Bob’s loss on the sale of the house is as follows :
Sale proceeds £380,000
Less cost (probate value) £400,000
Loss of £20,000
As private house relief is available on the property only part of the loss is an allowable loss. Bob would take over his wife’s period of ownership of the property.
Period of ownership 01.09.90 to 01.01.19 = 339 months
Period of only or main house 01.03.95 to 01.12.15 = 238 months
The final period allowed = 18 months
The loss was restricted by £20,000 x (238 + 18)/321 = £15,103
The allowable loss was reduced to = £4,897
The above is explained in HMRC Capital Gains
What’s Private House Relief?
What’s the legislation that deals with ‘private house relief’? PPR relief is the Taxation of Chargeable Gains Act 1992 sections 222 to 226. Section 222(7). States the following in relation to the period of ownership. When there is a transfer between spouse:
In this section and sections 222 to 226 we talk about ‘The period of ownership’. That’s where the individual has different interests at different times. They must be taken to begin from the first acquisition taken into account in arriving. At the expenditure under Chapter III of Part II. That Allow as a deduction in the computation of the gain to which this section applies. And in the case of an individual living with his spouse or civil partner:
(a) if the one disposes of, or of his or her interest in, the dwelling-house or part of a dwelling-house. Which is their only or main house to the other, and in particular if it passes on death to the other as a legatee? And the period of ownership of the other must begin with the start of the period of ownership of the person making the disposal and
(b) if paragraph (a) above applies. But the dwelling-house or part of a dwelling-house was not the only or main house of both throughout the period of ownership of the one making the disposal account must take off any part of that period during which it was his only or main house as if it was also that of the other
Also, see Taxation of Chargeable Gains Act 1992
