Another capital gains tax question

greenstick

I've seen a similar question posted recently but my circumstances are a little different.

Please could someone advise what the tax situation is on the profit from developing a house. This would be a one off project for me and my mum on a house we are due to inherit. We both currently own our own houses.

I believe there is approx £8k capital gains allowance, as we would be joint owners, can we use 2 £8k allowances? Someone has mentioned that we can also pay ourselves a wage, which would be taxed at 22% (income tax rate, as long as we stayed under the higher rate limit) instead of the 40% capital gains tax. Is this legal?

The answers I have seen on the other thread suggest keeping as a BTL, which we have little interest in. There is the possibility of me selling my house and living in the renovated property, but I won't be able to sell mine until after we have inherited. Would living in it affect the tax liability when it was sold?

Any information appreciated, this is uncharted territory for us both.

Robert_Sterling

Inherit the house.
Then sell yours.
No problem.

greenstick

TBH I'd rather not live in it, renovate and sell is my preferred choice but if it's going to cost a fortune in tax, then I would consider it.

If I do inherit, sell mine and live in the inherited house, is there a minimum amount of time I would have to stay there for before I could sell and move on without being hammered for tax?

Whilst it will be a cracking house when it's done, it's not really the kind of house for me.

Bluebirdnick

There is no minimum amount of time you need to live there. HMRC just need to see that you have occupied the house and treated it as your actual home. I would imagine that this would mean a couple of months minimum, but as I said, there is no statutory minimum period.

If you do not live in the house, you will not be able to qualify for principal private residence relief - this is the relief that effectively prevents homeowners being liable to CGT on the sale of their homes.

Depending on the actual gain made, this may or may not matter. From whom are you inheriting this house?

greenstick

Thanks Bluebirdnick

The house is being left by a grandparent. The estate is being split 3 ways but there is enough cash to pay the other third and for me and my mum to take the property as our share.

It's not going to make a fortune but it'll be a worthwhile project (tax depending)

John_Pierpoint

http://forums.moneysavingexpert.com/showthread.html?t=378254

See my reply to another thread above.

Be a little careful, HMRC may not realise you have improved the property since the date of death and come to the conclusion that someone put a false figure on the probate papers.

I think I would move in and take my time renovating it so that a decent period elapses between death and sale. I would also keep a record of everything you spend, as unless you both move in, mum might have to pay CGT, at 40% on the amount over her CGT allowance.

Good luck