Q. I would be grateful if you would advise me on a predicament both myself and my husband find ourselves in.
We both had our own homes when we married in 2012. My husband moved into my home and we rented his. At this time we took advice from a solicitor regarding regularising our affairs and both of our names were added to the deeds of each other’s property. We were told this was the best course of action as it would simplify matters in the event of the demise of one of us.
We are now about to sell my husband’s former home. He purchased this property in 2002. It was his principal private residence (PPR) until 2012. Our accountant has advised us that in his opinion we will lose 50 per cent of the PPR relief for the period of time that my husband lived there. Seemingly this has to do with the addition of my name to the deeds of the property in 2012.
We find it difficult to understand how our tax exposure has changed as we are assessed jointly with Revenue. If this is the case, surely many other couples will find themselves in exactly the same position. This seems to be a grey area and our advice is conflicting. We would welcome your opinion.
A. This is a tricky question as the legislation is not as clear-cut as one would like. But we have set out what we believe to be the generally held interpretation below.
The general rule on the transfer of assets between spouses is that there is no liability to capital gains tax and the transfer is treated as being made at such a price as gives no gain and no loss to the spouse making the disposal (in effect, the transfer is at the original cost).
There is a separate rule that applies to a principal private residence. If one spouse transfers an interest in a house to the other, which is their only or main residence, the other’s period of ownership then begins with the beginning of the period of ownership of the one making the transfer. I am assuming that the transfer of the houses took place at a time when you were already married and living in your house, and that it is your house that comes under this specific rule.
Your husband lived in his house (call it House A) as his principal private residence from 2002 until your marriage in 2012. He then went to live in your house (call it House B). Your husband transferred House A into your joint names and you transferred House B into your joint names, both in 2012.
The generally held view is that to deny the person principal private residence relief (PPR relief) on their initial home could be unconstitutional as it penalises the married state.
A person cannot have more than one principal private residence at any one time, and your husband is deemed to have occupied House B as his principal private residence prior to 2012 (from whatever date you bought your house). The generally held interpretation is that this would not affect the fact that his principal private residence from 2002 to 2012 was actually House A.
This is not made explicit in the legislation but the generally held view is that to deny the person principal private residence relief (PPR relief) on their initial home could be unconstitutional as it penalises the married state.
From your perspective, on the basis that House A was not used as your joint main residence, the normal rule should apply: that your interest in this house commenced from 2012, so your husband can claim the PPR relief up to 2012 when it ceased to be his main residence.
Although the tax legislation is somewhat ambiguous, the outcome set out above is logical: your husband is claiming PPR relief for the period when the house was his PPR. After that you are both claiming PPR relief on your house for the period during which it was either your PPR or both your PPR.
Published in The Irish Times. Answered by Suzanne O’Neill, Tax Partner at RSM Ireland.