CG65377 - Private residence relief: example: spouse or civil partner entitled to share of proceeds

Mr D bought a house in January 1983 for £45,000 and occupied it with his wife until May 1988, when they separated. He bought a new house for himself whilst she remained in the matrimonial home. They divorced in May 1992.

In August 1992 the Court ordered that Mrs D should be given 1/3 of the net proceeds of sale of the matrimonial home. She moved out in February 1993 and the house was sold with vacant possession in May 1993 for £165,000, costs of sale £6,000.

The gain accruing to Mr D is computed as follows

Mr D's Private residence relief

• Period of ownership January 1983 - May 1993 = 125 months
• Period of only or main residence

January 1983 - May 1988 = 65 months

• Final period allowed by TCGA92/S223 (2) = 36 months

The chargeable gain is £15,770 before annual exempt amount.

Mr D is not entitled to a deduction for the £53,000 (that is, 1/3 x £159,000) paid to Mrs D, because this sum is an allocation of the proceeds and not a deduction in arriving at the gain.

He is also not entitled to further relief under ESC/D6 because he has not transferred an interest in the dwelling house to Mrs D.

Mrs D is not chargeable to Capital Gains Tax on the £53,000 she has received. It represents financial provision for her ordered by the Court and is not a sum received in consideration for the disposal of an asset.

NOTE. If a taxpayer is within the charge to Capital Gains Tax, neither indexation allowance nor taper relief apply to disposals of assets on or after 6 April 2008. Previously indexation allowance had been frozen at April 1998. For indexation allowance see CG17207+ and for taper relief see CG17895+.