Does the 6-month residency rule still apply to Capital Gains Tax

VanMan2007

I own a second home which is rented to my mother. I bought it in 2001 and has about 10 years left on the mortgage.

When my mother passes, am I right in thinking I can rent my existing home, move into hers for a period of six months, using it as my primary residence (and whilst it is being renovated). Then when it comes to sell it, I will not be liable to pay any CGT?

Thanks guys.

00ec25

err ... NO it is an urban myth that there is a 6 month "rule". Eligibility for private residence relief (PRR) is based on a test of the quality of occupation not the quantity of occupation

On the assumption you have never lived in it since buying it, all that will happen if you move in and pass the quality test is you be eligible for PRR for the period you actually live there.
the reason people do move in is that under the PRR rules the last 36 months of ownership are always exempt from CGT therefore your PRR claim will be for 36 months out of the total period you owned it for.
But the idea is you only live there for less than 36 months - as i said that occupancy period does not have to be 6 months. You could live there for 1 month, claim PRR and sell up. Obviously HMRC will take the length of occupation into account when assessing your occupation quality, but there is no automatic trigger at 6 months

note once you have successfully established PRR status then you are also able to claim letting relief, even if this is, as in your case, retrospective from before you lived there. Letting relief is capped at a maximum £40,000

so if you move in now and then sell it you would be liable for CGT as follows:
ownership period 2001 - 2012 = 11 years
the gain being the difference between selling price and original purchase price in 2001
note th calculation shonw below should be in months not in years
PRR exemption is total gain x 3/11
CGT liable period is total gain x 8/11 less up to £40,000 letting relief

Fire_Fox

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

VanMan2007

Thanks 00ec25,

Will do more reading around the subject then, as I was obviously misinformed. Thanks for your advice.