Reduction in Capital Gains by transferring to spouse

by Readers Question

4 years ago

Reduction in Capital Gains by transferring to spouse

Make Text Bigger
Reduction in Capital Gains by transferring to spouse

My wife has a mortgaged flat solely in her name which we are looking to sell which would have a capital gain of approx £25,000 after costs. I know it has been discussed on here previously about adding a spouse (me) to the deeds on the day of sale to reduce the CGT. However, when I mentioned this to my solicitor he said “it would be difficult to add your name to the title as this would invoke the six month rule regarding purchase and transfer of titles of properties”. Reduction in Capital Gains by transferring to spouse

The purchaser would be buying with a mortgage, so I just wanted to know if this was true and if this change to title was still possible on day of sale.

Thanks to all who contribute on here – I find your advice very useful.

Richard

Comments

Mark Alexander

4 years ago

Hi Richard

Lending guidelines issued by the CML urge their members to be cautious about transfers within 6 months as these are often associated with mortgage fraud. Law Society rules are the transfers MUST be reported.

There is no such thing as "the 6 month rule" - see >>> http://www.property118.com/remortage-within-six-months/31856/

Your solicitor is right to flag the potential issue as some lenders are extremely small minded and don't listen to reason. However, this is very uncommon and a good solicitor with a decent reputation and the wisdom to report correctly what has occurred and why should not have any difficulties in persuading a mortgage lender of what has occurred and why.
.

Frank Coles

4 years ago

Hi,

I'm reading this with interest as my partner and I are in a similar position with one of our mortgaged BTL properties down in that there London.

About the dual ownership transfer Mark said in the link:
"The short answer to your question is yes and it could save you a lot of money. The key to this is that you MUST be married (which you are) or in a Civil Partnership. Adding your kids for example would not work because that would trigger CGT on the transfer to them. Transfers between spouses are CGT exempt so it works. The tax man seems to like married landlords 

The transaction takes place on the day of completion of the sale. It is a relatively simple transaction but the paperwork and timing have to be spot on for it to work."

So my side-question is simple, are the mortgage lenders involved at all or are they cut out completely during the change?

I will have a chat to my solicitor about this as well and see what he says. Interesting read on the "six month rule". Out of five BTL/commercial brokers I've spoken to recently they have all invoked this rule (as I primarily want to buy cash at auction and refinance later).

Do let us know how you get on Richard.

Cheers, F

Mark Alexander

4 years ago

Reply to the comment left by "Frank Coles" at "12/08/2014 - 08:39":

Hi Frank

It is a good question as to whether the mortgage lenders need to be made aware at all - certainly the mortgage lenders of the vendor don't and given that the transaction is, as you say, back to back, I can't see that there are any rules whereby the vendors solicitor needs to report the transaction to the purchasers solicitors. It would be the responsibility of the solicitor acting for the vendor to need to check Law Society rules and CML guidelines on this but I have never known it to cause a problem and I have seen this tax planning method used many times, even within my own family.
.

Tony McVey

4 years ago

The buyer's solicitors will certainly become aware of the transfer and may
well be obliged under the terms of their client's mortgage offer to report it to the lender.
This may complicate matters.

Richard Connell

4 years ago

Thanks for your comments.
Mark, would it be possible to share your solicitors details to discuss this?
Thanks
Richard

Mark Alexander

4 years ago

Reply to the comment left by "Richard Connell" at "18/08/2014 - 09:31":

Hi Richard, you need a good accountant/solicitor combo. If you've got a good accountant then he will be a le to recommend good conveyancers. If you haven't got a good accountant then I suggest that's the better starting place as you will need more advice from an accountant than a solicitor over the years you own BTL property. Here's a link to my accountants member profile >>> http://www.property118.com/member/?id=452
.

Leave Comments

Please Log-In OR Become a member to reply to comments or subscribe to new comment notifications.

Forgotten your password?

OR

BECOME A MEMBER

Mick Roberts on BBC Radio Nottingham