I have a property I let that is now jointly owned with my partner (99% mine, 1% my partners). We are not married.
It had been my intention to give another 98% to her in about two years time when I anticipate I'll have to start paying CGT if I dispose of it.
However, theres a chance that the housing market will fall considerably. Unfortunately, this will make very little difference to when I'll have to start paying CGT as it's the reducing proportion allowable to PPR that's the biggest factor baring a 70% fall in prices.
If the market does start to wobble, even if the final fall is only
10-15% it will make sense for me to gift the property to my partner before it actually falls. That way the time for it to move back up to the gifted price will make taper relief more attractive once it does start showing gains again.But if at the start of May the BoE puts up interest rates by 50bp and at the start of June there's news reports of "gazundering" starting again and we decide to do the transfer then, how do we get a fair valuation? Obviously we'd want this to be as high as possible (within reason) and it isn't going to immediately cost any extra tax if the taxman thinks it's too high and reduces it but I'd like to avoid being in the situation where I gift when the market might have fallen 5% but ten years down the line the taxman decides that we should have been at the bottom of the market and we overvalued the house by 30%.
(Deliberately overvaluing assets must be something the tax man has had to deal with before. An obvious way to exploit this would be to pick some hard to value asset (e.g. a painting) and then swap it backwards and forwards, increasing the valuation by the CGT exempt amount each year. When you do want to realize some real gains, then sell the painting on the open market and use that "loss" to offset your other gains. However I'm not looking to do anything more than get a good but fair valuation that isn't going to be disputed later.)
Following on from another thread, if I were say to give my partner xK from income over the next two years (and not affect my standard of living) could she then use that xK to buy a share of the house from me and so we could avoid any inheritance tax issues if I were to die? (This presumes the house price fall scenario doesn't happen). I could then buy it back from her a year later, gift her a bit more money and she buy it back etc, that way using up our 9k/year CGT allowance. Could we actually use stocks and shares to do this, that way potentially use up the 9k both ways - I assume there would still be stamp duty to pay, both for the shares and, potentially, for the property but at 125k we're talking about 2k to lock in 18k of gain.
(I don't actually know what the inheritance tax position would be if I were to die as I'm not sure what's counted. If I just take my assets and ignore bequests to charity then I think I probably fall inside the IHT threshold. But I don't know how life insurance, death in service benefit and pension fund is treated.)
Tim.