Capital Gains Tax on owned home question (live in SFA) 14 August 2012 at 6:02PM in UK armed forces MoneySaving 20 replies 3.8K views

Redouble

Can anyone tell me (if it's possible as I have a feeling there are no black and white answers) if we would have to pay CGT on a property that we own but have never lived in.
Family live in it, but don't pay rent.

Any help appreciated, selling is a little way off, so will obviously seek financial advice before hand. Just worried as the new 28% (I think it is) means we get a hefty bill!

Thanks in advance for any replies
Redouble

MissKitty

Redouble wrote: »

Can anyone tell me (if it's possible as I have a feeling there are no black and white answers) if we would have to pay CGT on a property that we own but have never lived in.
Family live in it, but don't pay rent.

Any help appreciated, selling is a little way off, so will obviously seek financial advice before hand. Just worried as the new 28% (I think it is) means we get a hefty bill!

Thanks in advance for any replies
Redouble

If you look on the Directgov or HMRC websites there is lots of info about when you will have to pay Capital Gains Tax (sorry I dont know how to post links).

Redouble

Thank you for your reply, much appreciate you taking the time x
I have had a look already but to be honest, I made me more confused. I couldn't make head nor tails of it

cinderfella

http://www.hmrc.gov.uk/cgt/property/

I always log into the HMRC site to save me buying a laxative:rotfl:

all you need to do is ring your local HMRC office. Make sure you have your credit card ready.

Redouble

Thank you for the link, I have checked it out already but don't understand it
Redouble x

SAHD_Jim

Not sure if there are any exemptions for service personnel, but these are the rules for houses bought for someone else to live in from direct.gov:

Selling a property you bought for someone else to live in

If you buy a house for someone else to live in and own it but don't live in it yourself, you will not be eligible for private residence relief when you come to sell the property. You are effectively making an investment in a property, so when it is sold at a 'gain' (profit) you will be liable to pay Capital Gains Tax on that gain

http://www.direct.gov.uk/en/MoneyTaxAndBenefits/Taxes/TaxOnPropertyAndRentalIncome/DG_4020890

also remember:

you only pay CGT on the actual gain
you can discount any purchase/sale costs plus capital improvements
you get an annual CGT exemption of £10,600 (£21,200 if jointly owned with spouse)

Redouble

Thank you, the confusion comes with the forces excemption but I don't know if it applies. Our 'profit' (ha!) will be about £100k so the bill large

MissKitty

I've just read through the HMRC website, it can be a bit confusing because not everybodies circumstances are in their criteria.

In one way it looks like you shouldn't have to pay as it is the only property you own and should be classed as your main residents but because you haven't lived in it that makes it more tricky. If your told you need to pay CGT because you haven't lived in it can you get round it by living there for a while before you decide to sell?

Your probably best to seek some financial advice to get a definate answer. I once sent an email to the Finacial Magazine "Moneywise" to get some free advice from one of their financial advisors. They emailed me back a few weeks later and the advice was good, things I didn't know about. They have a website, sometimes they publish your questions in their monthly magazine. I subscribe to it an it's really good.

Or you could try posting in the Tax section of these forums and see if you get any joy there.

molerat

http://www.hmrc.gov.uk/manuals/cgmanual/CG64555.htm

The important bit

It may be that the individual never actually occupies the dwelling house that they intended to occupy due to a change in circumstances or some other reason. Nonetheless, providing it was always the individual’s intention to occupy that dwelling house, relief will be available.

Pebbles69

We sold our house last year that we had rented out for 7 tears whilst living in quarters and although we had to fill in a tax return forms and pay tax on the rental income (after deducting mortgage interest , letting agent fees etc) there was no capital gains tax to pay even though the property value had increased by £40,000. the solicitor advised no cgt was payable due to not living it because hubbie is in thearmy and I even rang hmrc who confirmed this.
So you should be safe

Redouble

We will never live in the house and do not intend to (small 3 bed occupied by my mother in law and her husband - we bought it off them and they continue to live there which is why I think we would have to pay. We couldn't all fit in and we can't afford to lose our entitlement to our SFA at this camp as the waiting list is so long. )

It's not the end of the world, at the end of the day we will be making a profit at some point (when MIL and step FIL die, but they're early 60s so a way off!) they will move at some point in the next couple of years and that's when I will get a bill I expect. I will check out that magazine MissKitty, thank you

And thank you everyone for replying, it's been a real help! Xx