Capital Gains Tax on Divorce?

[DinkyMole]

Fiancé owns house with ex wife's sister. Ex wife lives in it.
As part of divorce, fiancé has taken no money from the house at all (she put in £50k deposit, he paid all the mortgage and bills for 5+ years). He will transfer the deed to ex wife's and her sister and they will do an indemnity until such time he can be taken off the mortgage (which is a pointless document I understand, can he not force being removed?).

His solicitor said she needs to talk about CGT. Surely he won't have to pay CGT on this? He hasn't gained anything!

There is relief from paying capital gains tax on one's main private residence. IF someone moves out they become liable to pay CGT, although there is no CGT to pay on the last three years before a property is sold. That means if the former matrimonial home isn't transferred in the three years after he moved out there could be tax to pay on any capital gain.

Alternatively perhaps the solicitor wants to talk about measures that can be put in place to avoid CGT. For example, your fiancé could nominate the former matrimonial home for main private residence relief as long as he isn't claiming relief on another property.

CGT is charged on the value of the property rather than how much it actually changes hands for.

So it's likely he will have to pay tax for not insisting on half the equity that he's been told he won't even get if he tried anyway?

Not necessarily. What STIDW states is correct. There is also an extra-statutory concession granted by HMRC (or at least there used to be) that means that even if the property gets transferred more than 3 years after he moved out he can still claim PPR (principal private residence relief) provided he hasn't in the meantime bought another house.

If there is a charge to CGT he should factor that in to the negotiations. You'd expect the wife to pay the bill if she's getting the property for nothing.

Thank you