Reducing CGT bill

up2mischief

I've owned a property for 6 years but never lived in it as I intended to do it up before moving in. I then met my husband and moved in with him. We bought a house together in 2003. I now want to sell my property having never lived in it. I have never rented it out either. It has been empty. My questions are:


[*]Do I still qualify for any taper relief?
[*]Would living in it for a short period make any difference? If so, how long would I have to live there for? Would 1-2 months be enough?
[*]I understand that I can gift a percentage of the property to my husband to take advantage of the yearly allowance. But if I gifted 50% to him would there then be no taper relief for 6 years ownership on his half? My husband earns less than me so gifting a higher proportion to him would make sense if it still qualified for the 6 years taper relief assuming that we qualify for this.
[*]Can I deduct the cost of the new kitchen etc that I put in the house from my gain?

It's all so confusing! Please help! I've read the Inland Revenue stuff but find it all confusing.

silvercar

the most saving will be gained by actually living in it. this means moving in and being seen to be there, changing address on all correspondance etc.

what is the gain in price? you do still get taper relief and AFAIK transferring half to your husband, the transfer is as if he bought it at the time and price you did as transfers between spouses do not incur a CGT liability.

Not sure about the kitchen; I think that replacing an existing kitchen is maintenance whereas installing something that wasn't already there is capital expenditure. Don't forget you can allow for EA fees and legal costs etc and you (each) have a CGT allowance, currently £8,800.

up2mischief

Thanks this helps me to understand. The gain is about 100K. What is AFAIK? Is there any time scale for living in the property? Would 1 or 2 months be sufficient to live there and have all correspondance sent there and would Inland Revenue still charge me CGT if they thought that I had only moved there for this reason. The property is a 3hr drive away from where I lived now but I am off work at present until June so could move there for a couple of months. This would obviously be a lot of hassle but if it saves me some money, it would be worthwhile. My husband would have to remain in our current house as he works nearby. Would this affect it at all? Seems rather drastic but it would help if it saved us money.

WHA

up2mischief wrote:

Thanks this helps me to understand. The gain is about 100K. What is AFAIK? Is there any time scale for living in the property? Would 1 or 2 months be sufficient to live there and have all correspondance sent there and would Inland Revenue still charge me CGT if they thought that I had only moved there for this reason. The property is a 3hr drive away from where I lived now but I am off work at present until June so could move there for a couple of months. This would obviously be a lot of hassle but if it saves me some money, it would be worthwhile. My husband would have to remain in our current house as he works nearby. Would this affect it at all? Seems rather drastic but it would help if it saved us money.

HM Revenue & Customs are likely to refuse the PPR relief if the circumstances look "artificial" - i.e. that you weren't really living there at all. You need to do more than have your correspondence sent there, you'd really have to live there, which means registering to vote, paying council tax as a resident, changing the address on all your bank and credit card accounts, utilities etc etc. What makes it worse in your case is that your OH would continue to live in the home you previously lived in and to which to return to. Would you actually stay in the other house most nights for a few months or would you continue to "live" in the marital home? If you aren't staying in the marital home, won't that cause risk in your relationship? I don't think the circumstances you describe will work either from the tax point of view or the practical point of view, especially for just a month or two. You'd need to stay there longer and preferably have your husband move in with you too to be guaranteed of PPR claim success. By the way, please don't think of engineering a marital break-up as justification, HMRC have heard it all before and would need "evidence" such as closure/suspension of any joint bank accounts, consultations with Relate or solicitors, etc - i.e. all the things that would happen if you "really" broke up!

up2mischief

Thanks - Was thinking that I could live there for a couple of months to finish renovations as I'm not working till June. We have to pay full council tax there anyway and changing correspondance addresses would not be a problem although awkward for just a couple of months. My husband and I spent a year living apart about 10 years ago and only saw each other 3 times that year but the relationship survived so I know we could do it again. However, it does seem that it would look artificial to IR and indeed would be so it's probably not worth it.