If, before a sale, they transfer the property back into the wife’s sole name is it possible to regain the PPR that has been lost?
Unfortunately not.
Transfers between married couples and civil partners are on a no gain/no loss basis under s58 TCGA 1992 but that in itself does not rewrite any ownership period. Therefore, the husband will have acquired his interest in 2018 for capital gains purposes for a proportion of his wife’s original cost.
For PPR purposes, there can be deemed ownership periods.
As you say, owing to the wording of s222(7) TCGA 1992 before the changes made by FA 2020, the PPR history was only “inherited” by the transferee spouse if the property was the couple’s main residence at the time of the transfer. The pre FA 2020 rule is outlined by HMRC in the third bullet point at CG64925 – the page also outlines the current rules.
A transfer back into the wife’s name would be on a no-gain/no loss basis under s58 TCGA 1992. We then have to look at what s222(7) now states to consider what the effect would be for PPR purposes:
222(7) In this section and sections 222A to 226, “the period of ownership” where the individual has had different interests at different times shall be taken to begin from the first acquisition taken into account in arriving at the expenditure which under Chapter III of Part II is allowable as a deduction in the computation of the gain to which this section applies, and in the case of an individual living with his spouse or civil partner–
(a)if the one disposes of, or of his or her interest in, a dwelling-house or part of a dwelling-house to the other, and in particular if it passes on death to the other as legatee, the other’s period of ownership shall begin with the beginning of the period of ownership of the one making the disposal, and
(b)if paragraph (a) above applies, but the dwelling-house or part of a dwelling-house was not the only or main residence of both throughout the period of ownership of the one making the disposal, account shall be taken of any part of that period during which it was his only or main residence as if it was also that of the other.
• The standard rule is that the PPR period of ownership starts when you first acquire an interest with a CGT cost/value. However, this is overridden for spouses/civil partners living together.
• On a transfer back to the wife, she will be deemed to have acquired the property for PPR purposes when her husband first acquired his interest in 2018 – s222(7)(a).
• As it was not the PPR of both of them from 2018, then PPR is given to the wife for part of that period when it was the PPR of the husband as transferor in that period – s222(7)(b). There was no such period.
Therefore, as the husband was not entitled to PPR from 2018 in respect of the property, all PPR would be lost if that half share was transferred back to the wife.
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