Firstly, Principal Private Residence Relief could be claimed for the family home, meaning that no capital gains tax would be payable on this. Secondly, the couple could claim holdover relief for the rental property meaning they would not be liable for the capital gains tax themselves. Instead the trustees in acquiring the property for the original acquisition value that the couple first paid will be liable for the capital gains tax on the property’s rise in value when they dispose of it.
The downside of all this to the couple is that from the date the trusts were created, they could no longer receive the income from the rental property, as this would have to be paid into the trust and the trustees will have to pay the income tax on this.
Posted by Lucy Newman, trainee in the private client practice group.
After working as a paralegal in the Real Estate team for a large city law firm, Lucy joined B P Collins LLP in September 2014.