Do i pay Capital gains on my house sale

Me_Myself_2

I see no reason for them to inform anyone. They both work full time and do this ON THEIR OWN HOME in their spare time. A perfectly legal way to work your way up the ladder.

WHA

Me_Myself wrote:

I see no reason for them to inform anyone. They both work full time and do this ON THEIR OWN HOME in their spare time. A perfectly legal way to work your way up the ladder.

Yes, of course it is a "perfectly legal" way to work your way up the ladder. But what it isn't is a guarantee that none of the profits made on each sale are exempt from tax.

When there is a clear pattern of regular property transactions, especially if you move more than once every year on average, they are VERY LIKELY to argue that the principal private residence exemption is not applicable and try to charge either income tax (on the grounds you are actually trading in business) or capital gains tax (on the grounds that principal private residence relief does not apply).

You have to be eligible to claim and be granted principal private residence relief.

One of HMRC's criteria is that "You bought it, and made any expenditure on it, primarily for use as your home rather than with a view to making a profit." (http://www.hmrc.gov.uk/leaflets/cgt1.htm#d1)

If you are constantly buying, renovating, and selling your home, HMRC could well be successful in claiming your motives are doing it for profit and to "climb the property ladder" rather than just buying your home to live in. In which case, you aren't eligible for PPR relief.

ahll

can I ask what PPR stands for ?

clutton_2

"" to argue that the principal private residence exemption ""

jamesd

Me Myself, so a sole trader builder can live in a series of houses as his principal residence and not pay income tax on his income from doing them up and selling them? You can probably see why there would be a tax problem for anyone who tried that, since the profits from the sales are what generate the income to pay him his wage in his normal jobs.

That's where the problem for other people comes in: if you're doing it regularly and it's continually moving you up the ladder, you are effectively a small construction business doing up properties and taking the capital growth as taxable profit on the building work.

LittleWoman_3

I'm not going into to whether someone is trading or not (Thats why you should go to an accountant and sort it out between you, to see if you will be able to argue a case for what ever you decide, so if the Revenue decide otherwise at a later date - life does not become too stressful, when you have to put your case forward to "fight it out"!)

BUT since the change is rules (In 2005 I think) making it illegal not to pay stamp duty (Solicitors are now criminally liable if they don't do it for you) - and stamp duty on property is paid to the Inland Revenue with the details of the personal selling as well as purchasing. Stamp duty is paid on the sale price, so all the information is now available to the Revenue, so its now a matter of time before they start checking the records, and putting one & one together to get two.

A lot of people "got a way with it" but I suspect not for much longer.... especially as they forget, the Revenue often ask questions many, many years later, and if they suspect "fraud" due to non-declaration they can go back more than 6 years.

chadfield

Not sure if i missed the detail but did OP actually say that they lived in this house and for how long? Period of residence v non-residence will determine how much (if any) of the gain will be exempt from tax...

olly300

chadfield wrote:

Not sure if i missed the detail but did OP actually say that they lived in this house and for how long? Period of residence v non-residence will determine how much (if any) of the gain will be exempt from tax...

It's a business as:
1. The person poster has not lived in the property and has no intention of moving in. (First post)
2. The poster says they want to start a business. (Third post)

Even if you are basic rate tax payer you have a duty to inform the Inland Revenue of everything as ignorance of the law is not an excuse.

It's best to play straight with the IR as you don't want them "investigating" your affairs, even if you are doing everything by the book the IR have been know to fine people who run small businesses, and cause serious finiancial difficulties.

Also the IR have a habit of creating retrospective tax laws.