Putting an asset into joint names with a spouse (or a partner in a registered civil partnership) prior to the asset’s disposal can be sensible capital gains tax (CGT) planning.
Which of the following CANNOT be achieved as a direct result of using this type of tax planning?
A Making the best use of annual exempt amounts
B Deferring the CGT due date
C Reducing the amount of CGT payable
D Making the best use of capital losses
Jerome made the following gifts to family members during the tax year 2014–15:
(1) On 28 May 2014, Jerome made a gift of a house valued at £187,000 to his wife. Jerome’s uncle had originally purchased the house on 14 July 1995 for £45,900. The uncle died on 12 June 2004, and the house was inherited by Jerome. On that date, the house was valued at £112,800. Jerome has never occupied the house as his main residence.
Required:
(a) Calculate Jerome’s chargeable gains for the tax year 2014–15.
Note: You should ignore inheritance tax. (7 marks)
On 12 February 2013, Marlon sold a house for £497,000, which he had owned individually. The house had been purchased on 22 October 1997 for £146,000. Marlon incurred legal fees of £2,900 in connection with the purchase of the house, and legal fees of £3,700 in connection with the disposal.
Throughout the period of ownership the house was occupied by Marlon and his wife, Alvita, as their main residence. One-third of the house was always used exclusively for business purposes by the couple.
Entrepreneurs’ relief is not available in respect of this disposal.
For the tax year 2012–13 Marlon is a higher rate taxpayer, but Alvita did not have any taxable income. Neither of them has made any other disposals of assets during the year.
Required:
(ii) Calculate the amount of capital gains tax which could have been saved if Marlon had transferred 50% ownership of the house to Alvita prior to its disposal. (2 marks)