Do I have a problem with my girlfriends house sale ?

wytco0

I have just found that I might end up with a tax liability when my girlfriend sells her house.


Can anyone help me sort out the best way of dealing with this and how to minimise or remove any liability.

guppy

I believe if you have lived in both, you can simply elect which one should be treated as your main residence for Capital Gains Tax. I would suggest you seek professional advice though

00ec25

guppy wrote: »

I believe if you have lived in both, you can simply elect which one should be treated as your main residence for Capital Gains Tax. I would suggest you seek professional advice though

the OP cannot do this , it is too late, the rule is you can make an election within 2 years of your change of circumstances, ie when you first have 2 properties. The OP became an owner in 2001, the fact it was apparently uninhabitable for a period is irrelevant. The clock ran out in 2003.
Ignore the comment on the other thread about flipping 2 days before completion, I hope that was tongue in cheek.

p00hsticks

I think before you get into all these covoluted suggestions any deeper, the first thing you need to do is establish whether you do actually part-own the property or not. After all, before you get to any tax implications, your girlfriend is going to find she's not going to be able to complete on any sale of the house anyhow without your agreement if she doesn't own it 100%.

If you are really unsure, then I suspect that checking with the land registry would show up who it has down as the owner(s) of the property, and in what proportion.

Once you've got that established then you can see whether you need to worry about CTG or not.

James_Trimby

HI you have had some good advice here and I wont repeat (Jimmo and Silvercar) but I note that you mention large repair works on the house. If this was not "repairs" but actually to bring it up to a hibitable position etc I think you should be able to include these are costs in the calculations that silvercar did for you. Also re costs it is the buying and selling costs (so stamp duty etc legal fees and estate agents)

This should bring the calculations down to a more reasonable level. The flipping mentioned above IS CORRECTED only still possible if claim made originally on time then one can amend it see below SORRY!, possible still and the election is carry backable by 2 years so you could reduce the gain still further by a fraction based on 2 years over length of ownership BUT rightly pointed out better done sooner rather than later plus then will effect the main residence exemption on your flat.

I would look first at indentifying all costs on property (building not maintainence) and use calcs above to see what your problem actually is. Then look at how much you have paid as % for maintainence and building works as compared to GF IF you've paid about 50% then thats it. If you've paid say 25% then not matter what legal position is in writing you could try and argue that "beneficial ownership" was say 25% not 50%. This might not be easy to prove but finances will be the place to look as doesnt sound like anything else will help much. Use the 25% (if that is what it is) in the calcs and see how much figures are effected Look at the difference between the two and make a decision as to whether worth fighting over?

re not selling NEVER let tax tail wag the dog! Look at the profits made and be happy!

00ec25

James_Trimby wrote: »

The flipping mentioned above IS possible still and the election is carry backable by 2 years so you could reduce the gain still further by a fraction based on 2 years over length of ownership

Interesting, on what basis?
I was advised that I was now too late for a place I bought in 2003 and that the election must be made within 2 years of the particular set of circumstances of when you first have 2 properties. HMRC website specifically emphasises the deadline and, as discussed on a previous thread, unless you have made a valid election to start with, you cannot subsequently vary it.

James_Trimby

00ec25 Sorry you are correct I was in too much of a hurry! Generally where this situation arises the advice is to the file an election (even if not moving and buying a BTL etc, though likelyhood is that existing PPR is still elected for) This then allows you to move the PPR at a later time with out any problem (as long as you do occupy the property occasionally!) It was this my mind was thinking of not the original claim. This has been what many MP's had been doing (as well as flipping for expenses) and is very common with second holiday homes etc. I'll amend original post! The trigger for the 2 years is the change of house ownership so one needs to consider date of BF flat purchase as well as if within 2 years can still file a claim.

WHAT I would add though is that IF you can prove that for say a 1-2 month period the flat WAS the main residence then that period could trigger the 3 year PPR relief overlap. To do this the facts have to be correct but current tax planning seems to suggest that 1-2 months should be enough though the longer the better and easier.This is going to be done to the facts of the case re which addresses given out/electoral lists/possessions/etc.

00ec25

James_Trimby wrote: »

WHAT I would add though is that IF you can prove that for say a 1-2 month period the flat WAS the main residence then that period could trigger the 3 year PPR relief overlap. To do this the facts have to be correct but current tax planning seems to suggest that 1-2 months should be enough though the longer the better and easier.This is going to be done to the facts of the case re which addresses given out/electoral lists/possessions/etc.

agreed, the decision as to which property is the PPR is then based on the facts and as stated establishing those can be rather tiresome, especially if it is obviously been done to aid a property sale, so 1-2 months is pushing it.

One benchmark indicator appears to be "where would your friends reasonably expect to find you". In the OP's case he says he "spends 2-3 days per week at each others house" so thats not very clear cut either as it hints at his own home being the slight majority instance, but its not clear cut and means the other indicators would have extra weight, such as where is his correspondence sent, which electoral roll etc.
Of course if the two properties are within the same local authority area, it could get even more fun deciphering the situation, especially if it is a trivial exercise to go from one to the other on a daily basis. You will have to argue that case with HMRC.

wytco0

Wow this is complex .

Having read everything here and on the other thread, I am really not sure who owns the house. I had always assumed it was hers, but anyway I think that's water under the bridge as its not very relevant as it looks as though the tax people will assume its jointly owned.

I think I will need to get professional advice on this.

However one point that may be relevant ....

The house was found to be faulty and she had to sue the surveyor, this went on for about 3 years and she was awarded about £33,000. The house was then repaired but this cost £95-100k, so she is actually making only a modest gain on selling it. Can any or all of this cost be taken into account with the gain?

James_Trimby

As mentioned above I think this is relevant. As long as long term capital in nature reather than just maint of prop. Which, from what you says seems to be the case.

Figures then become initial profit (355 - 210) 145,000 less legal costs etc for sale and purchase (est £10k) therefore profits £135,000. Less additions to property (100k less insurance claim 33k = 67k) Profit then £68,000 Your share 34,000 less your annual exemptions of 10800 Taxable gain £23,200 @18% Tax payable £4176. This assumes the cost on doing the property up was met out of your joint income etc... If you paid alot more than 50% then one could look at these calcs again and up your percentage of costs. But if close to 50% I would not bother.

I would keep it simple and go with this sort of calc. For £4000 it is not worth trying to do anything too clever and then coming unstuck with a potentially larger problem. Just try and pull together backing for all the costs (purchase,sale and building works) to try and maximise costs and as evidence should you be unlucky enough to have to explain yourself to taxman