Will we be liable to CGT?

kimmi

Hi
Before I raise the question with the Tax office, I’m wondering if anyone can advise?

OH & I have lived in rented accommodation supplied by OH’s employer (Council) for over 13 years, and the rent we pay is the same as council house tenants pay. He’s a groundsman and our house is adjacent to the bowling greens he works on.

If he leaves his job before, or carries on working with them until he retires, we would have to leave the property and find somewhere else to live.


We recently had the opportunity to buy a property which was very run down, not the ideal home or location, but the price was right!


We’re currently in the process of renovating it, and once its finished, we’re probably going to put it on the market, and if we can sell we’ll then be looking to buy another property nearer to us, for us to eventually move into.

We’re hoping that the work we’ve done to the property will result in an increase in value, so if we do manage to sell we’ll have a larger deposit to put down on the next property.

Our question is, if we sell and make a profit will we be liable to Capital Gains tax on the profit (less the allowance and monies spent on renovations) as we haven’t actually lived in the property?

Or should I go and live in it for a while when its on the market? He'd have to stay in the rented place as he's still working.

TIA
Kimmi

Pumpkinface_2

Even worse than CGT, I think income tax could be due as you could easily be viewed as a property developer in the scenario as described.

I am really not sure that you living in it for a short while will convince HMRC that this is not a property devleopment opportunity and in fact this is your main residence, especially if you are only living in it whilst it is on the market.

Nosht

Live in it, collect mail & utilities bills &c & you have proof that it is you main residence.

N.

fengirl_2

I agree that you are more likely to be viewed as property developers as you have bought the property to do up, get a profit and make money to buy somewhere else. As you are living in job related accomodation (I assume you need to live by the school for good operational reasons), you would not normally be liable to CGT when you came to sell a property which you owned whilst living in job related accommodation.
I would not ask HMRC for their opinion - partly because no one on the helplines is qualified to help on this and also because HMRC won't be bound by any advice they give. Under SA, your tax liability is your resonsibility. I would pay an accountant a one-off fee for some proper advice on this issue.

kimmi

Thanks for the replies.
I think a visit to an accountant is required.

Kimmi