CTG liability?

PJackson_2

Hoping someone can help me! It's a bit of a long story and complicated!

My boyfriend (now husband) and I bought our first home in Sept 1999. He lived in the property for one month and then had to move with his job. I lived in the house until Aug 2000 and then moved with him. We rented our house out and lived ourselves in rented until April 2001 when we bought our second home and moved into it.

We then sold our second home in Aug 2003 and moved into rented accom associated with DH's work. We, upon advice, wrote to the IR to elect our first home as our 'main residence' once again, siting our move due to DH's work, upon selling our second residence (which I guess had become our main residence whilst living in it). We have letters to say they've noted this on their files. All this time our first house was rented out.

We got married and were given advice to transfer the house into my name solely as I wasn't working (had a baby) and DH was paying higher tax. We did this around Dec 2006. Since then it's purely been in my name and I am declaring rental income to the IR each year in self assessment but don't pay tax as the earnings are below the threshold.

We then moved location in Jan 2008 and are in private rented accomodation but now want to sell our house to fund our (final, I hope!) house purchase as we want to settle in one place due to schools etc. We are hoping to put the house on the market next Spring. It is still solely in my name and is rented out - has been pretty much rented all this time.

I'm really concerned about my CTG liability for that period of almost 2.5 yrs where we had a second home (which we lived in) from April 2001 - Aug 2003. And the fact I only lived in the first house for 11 months....

Can anyone give me any advice please? Would we be best to transfer a portion of the house back to my DH? It's a real pain as we really need the cash to fund our house purchase. The house initially cost us £78,500 and is now worth around £195,000. I have taken advice in the past re above but the man we used has now sadly passed away and I wouldn't know who to use without a recommendation....

PJackson_2

Wow thanks so much Jimmo for taking the time to be so thorough. I have to say we acted on the above on financial advice some time ago and the chap we used (who has now passed away was well aware of our circs etc and normally gave v sound advice).

To try and answer your queries: We were married when the house was transferred into my sole name. We married in November 2002, transfer took place in Dec 2006. I'm a little confused about why we could not re-elect our 'first' house as our main residence, especially as we were in rented accomodation ourselves and therefore did not own the house we were living in. The period where we owned two homes was April 2001 - Aug 2003 as I said earlier. DH is in the armed forces (hence why we moved so much and lived in work related accom for so long) - I really wish they would have better tax laws for AF - it is very difficult moving around every few years and trying to keep a 'house' so that you don't fall behind with purchases/the market etc.

We did receive confirmation back from the IR (HMRC) that they had noted on their files that we were in work related accom and so had relelected our first home as our main residence - when it comes down to it then, it that worthless? I was hoping the period from August 2003 (when we sold our second home) to now would be also classed at 'main residence' despite the fact we are in rented accom due to DH's work. Just re-reading your post, it appears that we can show our first home as being our 'main residence' from Aug 2003, as we were in fact married then and living in his work related accom (we could not live in it before marriage as they did not except unmarried couples hence we had to privately rent!) - his place of work was 160 miles away from our 'home' so there was no question of us living in it.

So, if I have this right, I can elect the first 11 months as living in it, thereafter, I cannot relect it as my main residence until Aug 2003 onwards (and obv last 3 years of ownership). Is this right? Would they class the 11 months or round up to 1 year? If I'd known I would have stayed in the house for an extra month lol!

Where it gets sticky again (told you this was long!) is we have now been back in rented accomodation (privately renting so not actual forces accom altho DH still in AF) for 18 months or so (Jan 08 onwards). This accom is only 10 miles or so from our 'home' - we did not move back in to it as it's not a family house and we now have two children, so we decided to rent and wait until the market picks up to sell the house and then buy here to settle. BUT, if I read correctly, this does not matter too much as the last 3 years of ownership when you sell as classed as 'given' anyway?

Thanks ever so much for your help. At the end of the day if we have a tax to pay then so be it as long as it's not 1000s of pounds as we really need the money to buy and settle and don't have much cash! PS - Also, I presume when we sell we'll have solicitors fees and estate agents fees to deduct from the chargeable to tax gain so it may not be that bad after all ?

Elaine_Wilson

What I'm going to say may sound pedantic but it is best to get the terminology right when you take advice on this.

I'm a little confused about why we could not re-elect our 'first' house as our main residence, especially as we were in rented accomodation ourselves and therefore did not own the house we were living in.

I think the election you are talking about is the one where you own two properties, both of which are used as residences. You only owned one house so did not have two properties to choose between.

So, if I have this right, I can elect the first 11 months as living in it, thereafter, I cannot relect it as my main residence until Aug 2003 onwards (and obv last 3 years of ownership). Is this right?

Again "elect" is inappropriate. Residence is generally a question of fact. For the first eleven months you were living there so it was your residence. This period also entitles you to treat the last three years as though you were resident.

It looks as though you will be able to treat the whole period from August 2003 as exempt due to Job Related Accommodation rules but I do not know much about these. Hopefully Jimmo or someone else will confirm.

If so then you will have about seven years exemption which would wipe out the gain.

Would they class the 11 months or round up to 1 year? If I'd known I would have stayed in the house for an extra month lol!

Ha, they won't round up. That would make life too easy. You should do the actual calculation in months (or maybe days, to appear flash). Jimmo used years to simplify the calculation since the accurate figures are not available.

PJackson_2

Thank you to both of you for all your help :j

I did some calculations myself and did come to the same conclusion once I knew I could use the last 8 years as ownership.

I'm so pleased that there appears to be something for AF personnel. The only way we might come unstuck I guess is that the property is solely in my name and has been since 2006, but regardless of that, we are married and therefore as a family we moved with him and his job....

I do complete a return each year and have done since we rented the property out all those years ago - didn't want to get on the wrong side of the law! And I'm one of those people that couldn't sleep at night if I wasn't 'playing by the book'!

I feel so much better knowing that there will be no tax to pay, not because I like to evade tax (as I said above, we've been declaring rental income from the start) but just because we need every penny to buy our family home with prices the way they are these days! :rolleyes:

Thanks again :T