Would we have to pay Capital Gains Tax???

GIRLPOWER_2

Hi,

We have lived in our current property since 1997. We would like to sell and buy a different property that we would live in whilst renovating. We would then like to sell that at profit and move into another property that needs works to live in whilst we renovate.... Each time knocking the profit off the mortgage with an aim of becoming mortgage free.

We would only ever own one property at one time which we would be living in with our children.

I have read the info on direct gov but it does not give an example of the above... Can anyone please help?

Thank you, Nikki

Gonzo33

By the sounds of it it would be your main home, and therefore you would not pay CGT on it as it would be subject to 100% Private Residence Relief.

If I am wrong I am sure someone will be along to correct me soon.

kingstreet

I agree with Gonzo. If it was a second property, it would be liable to CGT if you make a gain. As it (and future properties) will be your main residence, you/it are exempt.

GIRLPOWER_2

Thanks for that, was not sure if you had to live in them for 36 months to get the 100% relief.

saverbuyer

I think it's the case that if this appears to be a business, i.e property development HMRC will expect you to pay tax on your income.

GIRLPOWER_2

saverbuyer wrote: »

I think it's the case that if this appears to be a business, i.e property development HMRC will expect you to pay tax on your income.

As my first post said I would hope to make a profit as would be renovating ourselves. Confused again now :-(

saverbuyer

If you are doing this on repeatedly on multiple properties then it would be considered a trade (property development). Any gains would therefore be considered an income and subject to tax and NI.

If you buy, renovate and sell without letting the property ,you could be considered property developers.

saverbuyer

Worth reading this from HMRC

http://www.hmrc.gov.uk/manuals/cgmanual/cg65200.htm

GIRLPOWER_2

Thank you, upon reading this it would appear we would have to pay capital gains tax :-(

martinsurrey

In practice everyone who does any extension onto their house is doing so both for the extra space, AND in the hope that they make some cash when they sell.

As long as you are living there and using the space and not flipping every 2-3 months HMRC would not be interested,

as detailed in the guidance

"
The subsection should only be taken to apply when the primary purpose of the acquisition, or of the expenditure, was an early disposal at a profit.

"
I would say that the primary use is a house for you to live in, especially since its your only and main residence (if you owned a mansion and claimed the second smaller house as your main residence as you renovated it, then sold, HMRC would think differently as the primary reason for using this as a main residence is to get out of CGT).

But if you’re worried, get some professional advice

00ec25

martinsurrey wrote: »

I would say that the primary use is a house for you to live in, especially since its your only and main residence (if you owned a mansion and claimed the second smaller house as your main residence as you renovated it, then sold, HMRC would think differently as the primary reason for using this as a main residence is to get out of CGT).

But if you’re worried, get some professional advice

its not as clear cut as you make out

firstly you ignored the primary caveat:
"Before applying TCGA92/S224 (3) you should always consider the possibility that the taxpayer has undertaken an adventure in the nature of trade, see CG65214+." as explained above by saverbuyer

if the OP survives that test and is then subjected to the tests you quoted, then it will come down to patterns of occupancy and timing

move house once every 5 - 10 years and if won't be questioned since as you say an extension or other improvment would not be unremarkable over such a period

move every 2 years for no obvious reason (eg job in another location) making a profit on the way then its possible you'll be investigated

do it every year and its a certainty