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I have a tax return question. I met my now husband in September 2005. We married in March 2008 at which point he transferred his private home into our joint names.

He originally bought the property in 1987 and it was his only home for the intervening years before we met.

We both lived in the house from March 2008 to July 2009 as our primary residence, and again between July 2012 and March 2015. 

We moved elsewhere and either let it or left it empty for other periods, before selling the property at the end of December 2017.

Some Capital Gains Tax becomes due for me, I agree. But on what period?

My question is, am I considered to be liable for CGT from March 2008 when I first owned half the property, or from 1987 when my husband first bought it?

My accountant advises the latter which does not make any sense at all to me. Why would I pay CGT tax on something I never owned from 1987 to 2008?

The accountant says I will owe in the region of £13,000. My husband owes CGT in the region of £485 – which is more understandable, being the CGT for the periods it was let for in his joint half ownership.

Heather Rogers, founder and owner of Aston Accountancy, replies: You will only be charged CGT based on the time you had a stake in the property, from 2008 onward.

Even so, your tax bill for your much shorter period of ownership will still be much bigger than your husband’s.

I realise this sounds strange, and I explain how and why this has come about in greater detail below.

But in brief, the profit from the property and hence the CGT on it is calculated based on the cost of purchase in 1987 and the proceeds from the sale in 2017.

And even allowing for the fact you only became a joint owner in 2008, your husband lived in the property and can therefore claim private residence relief for a much bigger proportion of his period of ownership than you can for the shorter period in which you owned half the property.

Why are you being charged more CGT than your husband?

I understand from your question that in 1987 your husband purchased a property, which was his main residence, and, when you married him in 2008, he transferred 50 per cent of this property into your name.

You lived in the house together, as your joint main residence, as a married couple for two periods from March 2008 to July 2009 and July 2012 to March 2015 and the property was sold at the end of December 2017.

The rules on disposing of a property in connection with CGT depend on how the property is used.

Although I have no figures, the amount of tax you are being asked to pay does sound extremely high compared to your husband’s.

However, your husband’s situation is quite different from your situation.

Let me explain why that might be.

Your husband lived in the property from 1987 when he purchased it to July 2009 and this was his main residence for that period.

It was also his main residence for an additional approximate three-year period between July 2012 and March 2015.

As it was your husband’s main residence for all of that time, he would be entitled to private residence relief, which means that the only period of ownership where he could be in a CGT situation is for the three-year period between July 2009 and July 2012 and the period between March 2015 and the disposal in December 2017.

Therefore, the period that would attract CGT and would not qualify for private residence relief is a relatively small period of time in his ownership, hence the relatively small liability.

However, although you have had a stake in the property for a much shorter period, in your case you have only been able to claim private residence relief between the period March 2008 and July 2009 and July 2012 to March 2015.

For the rest of the time that the property was owned by you, you cannot claim this relief as it was not your main residence. This gives rise to a larger chargeable period relative to your time of ownership.

What are the CGT rules for married couples?

Let me explain how it works when the property is gifted to you by a spouse/partner.

When your husband transferred 50 per cent of the property into your name, because of the rules concerning married couples, no CGT would arise at that time.

This is because gifts between spouses are treated as if no gain or loss occurred on the disposal, regardless of the value of the asset, so that they are effectively ignored for CGT purposes.

This provision for husband and wife overrides others which are included in the Taxation of Chargeable Gains Act 1992.

Your husband, when he gifted you 50 per cent of the property would have done so at a no gain no loss and therefore you would not have had any capital gains arising at that time.

What about when you dispose of a property?

When you subsequently dispose of an asset, you pay CGTon the profit – in other words, the difference between the net proceeds and the total cost of purchase, plus certain other allowable costs that may have been incurred.

Your cost of purchase which you can offset against any sale proceeds is limited to 50 per cent of the amount your husband paid when he originally purchased the property back in 1987.

There used to be an allowance for individuals to cover gains from inflation, known as ‘indexation’, but that will only have been applied in this case from 1987 until its abolition in April 2008.

The reason I believe that your CGT is so much higher than your husband’s is that although your chargeable period is only from the time that you owned the property, you are using your husband’s base cost which he paid for the property back in 1987, without any of the relief that your husband is entitled to.

This is because he can claim private residence relief on the period when the property would have acquired the majority of its increase in value.