CGT + reinvestment

anitak

Hi there. Havent posted before so hope I ask this in the right way.
I have owned a rental property for 10 years and am considering selling as property has possible subsidence problem. I realise I wont make huge profit, but thats okay. My question is - if I take the profit and reinvest it immediately am I still liable to pay the CGT? A friend suggests this is possible, but how would it work? Any ideas you may have greatly appreciated.
Thanks
anitak

dunstonh

If you sell the asset, you will have a gain whether you buy again or not. If the gain is sufficient for you to pay CGT, then you are liable. You could offset that gain with a lossmaker if you want.

Petmidget

Afraid the answer is yes.

There are range of reliefs of a reinvestment nature available for business assets though. But BTL dont qualify.

frannyscho

In the Sunday Times October 8th money section, there was an article talking about investors dodging CGT on buy to lets, I expect you could see it on line somehow. It had a couple of ideas.

dunstonh

The inland revenue have highlighted buy to lets as an area where they dont think people are declaring the tax they owe.

The new rules coming in next year (which were meant for this year) would allow the HMRC to see who is earning what rent and how much properties are bought and sold for.

prudryden

dunstonh wrote:

If you sell the asset, you will have a gain whether you buy again or not. If the gain is sufficient for you to pay CGT, then you are liable. You could offset that gain with a lossmaker if you want.

Dun - Could he move into the property for a period of time (6 months?) and then sell? Would he also have to rent out his previous legal residence in that case? Hopefully, this is not off topic.

Ian_W

If she moved in it would become her PPR and would be exempt for the time it was, plus the last 3yrs ownership [which would overlap] so it wouldn't completely automatically absolve the liability for CGT, depending on the gain, as she's owned for 10yrs.
Anita, 10yrs ownership gives you 40% taper relief and you have a personal CGT allowance of £8,800 [each if jointly owned]so when you say you won't make a lot, because of the subsidence, it may be that those two mean you pay little or no CGT. Depends on the gain but you'd probably end up saving some money using an accountant to do the calc for you.

anitak

Thanks to all who have posted on this topic. Its been of use. Now I need to know about the 3 year rule!! Can anyone fill me in? THX.

Ian_W

PPR is here, with the "3yr rule" under the paragraph entitled "period of ownership" on p2:
https://www.hmrc.gov.uk/pdfs/2003_04/capital_gains/ir283.pdf

Do bear in mind that it is a factual test and you may have to prove it was your PPR for a reasonable time and that you can have only one PPR at once so it may have a knock on affect with other property you own.

As I said earlier, if you're only making a small gain, you may not need this relief and it could be a problem to "contrive" it.