My brother and I jointly inherited my parents’ house on their death. My brother has lived in the house for 69 years and still does. I have since married and purchased my own property. We have spent years renovating my brother’s house, converting it into two flats, which now have separate values due to size and garden. We plan to sell the two flats. How can I minimise my capital gains tax (CGT) liability, notwithstanding my brother will not be liable, as this is his only residence? Do we need to re-register the properties under different names, with me taking on the lower valued flat?
Arthur Weller replies:
There is a relief from CGT for two joint owners of a property who wish to split up and not incur any CGT, as per HMRC’s Capital Gains manual at CG73000. However, it does not apply when it involves the main residence of one or both of the two parties. There is another relief that applies when two individuals swap rights in each other’s main residence: see HMRC’s guidance at CG65150P. But in your scenario, only one of the two parties is using the property as his main residence, so I do not know how you can minimise your capital gain. It appears that you have jointly owned the property for a long time. Therefore in your CGT computation, make sure you use the March 1982 valuation if it is later and higher than the original acquisition cost.