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My husband and I have a second property, which we rent out on an assured shorthold basis. We put it in both our names so that we could use double Capital Gains Tax allowance if and when we sell. I am a non-taxpayer and my husband is taxed at 40 per cent. If we put the house in my name so that we pay less tax on the rental income, could we then return it to both our names at some stage prior to selling? If so, how long before we put the property on the market do we need to do this?
Maggie Fleming writes:
AHM Revenue & Customs has been cracking down in recent years on what it sees as tax loopholes, but this is an area that has so far largely escaped scrutiny. Provided the transfers between you are genuine outright gifts, with no strings attached, you can swap the property back and forth at will. There is nothing wrong with your plan; this is simply sensible tax planning within the family.
However, HMRC can query a transaction if it feels that "artificial steps" have been inserted to save tax and a transfer just before a sale could trigger an inquiry. You should make absolutely sure that the transfer is legal and complete before putting the property on the market.
As for timing, I would recommend that you use your common sense and do not sell immediately. A gap of a few months should be fine, but if you want to be really safe, transfer and sell in different tax years.
Seek professional advice if the property has ever been the principal private residence of either of you because the additional relief of up to £40,000 per person - due when the property has been let as residential accommodation - could be disallowed if the rental income has been assessed on only one of you.
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