Q&A: main residence capital gains tax

In our regular Q&A series from Croner Taxwise, trainee tax adviser, Alexander McCarthy explains whether a taxpayer can claim their old marital home is still their main residence for capital gains tax (CGT) purposes when it is sold

Q. Several years ago, I separated from my wife, but the divorce has now gone through. I still own half of the marital home, but I have been living in rented accommodation since the separation. Can I claim that my old marital home is still my main residence for capital gains tax purposes when it is sold?

I intend to remarry and my girlfriend wants to give me a share of her current home after we are married. Apparently this was let for a time before my girlfriend made it her home. Would there be any capital gains tax advantage in doing this?

A. There are two properties under consideration here.

Previous Marital Home

This ceased to be your main residence when you moved out. On a sale you would be entitled to private residence relief (PPR) for your period of occupation and the last nine months of ownership.

Therefore, if you moved out before the final nine months, a chargeable gain may arise on a disposal.

Under TCGA1992 s.225B it is possible to make a claim that the former marital home is your PPR even though you have ceased living there.

However, this only applies where the property is being disposed of to your ex-wife, not to anyone else. In addition, three conditions must be met.

  1. the disposal is broadly under an agreement or court order regarding the dissolution or annulment of your marriage;
  2. that the property remains the PPR of your ex-wife; or
  3. that you have not given notice that another property will be treated as your PPR.

Girlfriend’s Home

Among the Finance Act 2020 capital gains tax changes was that from 6th April 2020 you and your wife no longer need to be living in a property as your PPR to inherit the PPR history from your wife – TCGA 1992 s.227.

Therefore if you are given a part share of the property after marriage, you will inherit your new wife’s PPR history – including the non-occupation period when the property was let – even though you never previously lived in it before.

Interaction of Above Rules

When you remarry, you and your new wife may only have one PPR between you (TCGA1992 s.222(6)).

If you move into what is now your girlfriend’s house followed by a transfer into joint names after marriage then, as mentioned above, you will inherit your new wife’s PPR history.

Therefore, if you later dispose of your share of the old marital home to your ex-wife and claim PPR under s225B, then this would affect your entitlement to claim PPR on your new home.

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