A non resident and domiciled husband H, with 2 wives, one abroad W1 one in England W2.
H spends more of the year in his house abroad with W1, so the house in England cannot be said to be his PPR, and he has not made an election for it to be his PPR. If he gives his half of the house to W2 (no gain no loss) will W2 get full PPR on the whole of the house including H’s share in the future?
H and W2 have owned a residential investment property as tenants in common since before 6 April 2015. If W2 gives half to H (no gain no loss), on a future sale by H, will he pay non resident CGT on the whole of the property rebased to 6 April 2015, even though he did not own her half then, and she would have had to pay much more CGT if she had sold it?
In both cases, are hmrc likely to attach under GAAR and/or associated operations, although they do not usually do so between husband and wife.
Surely W2 would not be recognised as a legal spouse under UK law provided he married W1 first and remains married to her, so the assumption of spousal no gain/no loss would not apply or am I missing something fundamental?
I believe there is recent case law recognising polygamous marriages entered into in a country which recognises them for uk iht spouse exemption, so presumably the same would apply here.
Whilst I do not profess to offer any sort of legal opinion, and stand to be corrected, it is dangerous to presume anything so far as HMRC are concerned. CGT does not have the same rules as IHT and, if correct, this would open up a myriad of possibly ‘abusive’ tax avoidance possibilities that would quite possibly attract GAAR attention.
I think the market for such planning would be fairly limited (!) but GAAR is a concern.
Perhaps it would assist if we looked at this without the two wife scenario, (or if W2 were married first). In this instance, surely this is purely a CGT/IHT issue, namely what are the consequences for a non-resident and non domiciled husband giving his share in the matrimonial home to his wife. Is PPR available, and/or does a no gain no loss situation arise. I have not come across a situation where gains tax applies between spouses. There shoudl be no IHT consequences either as spouse exemption should apply as it is in favour of a UK dom spouse.
As regards the second scenario, leaving aside the potential loss of IHT spouse exemption, presumably no loss and no gain between spouses means that husband therefore pays tax as if the whole property were rebased as at 6 April 2015. As Simon says the market for such planning is limited (as appears GAAR at the moment), and if husband keeps the funds and does not share with his wife then surely that is a defence against GAAR?
I Will Solicitors Ltd