CGT on gifted first property?

StarsDie

getmore4less wrote: »

The prolem is(unless you were very carefull on the phone) you have allerted HMRC.


The reality is that many taxes are voluntory and in a lot of cases CGT is one of them, allthough not that good if you get caught.


Moving in for a year won't eliminate the CGT assessment so there could still be a liability. It would give 3 years out of

There is a chance when you come to sell know one will notice but a year is not that long to cover the I did not know better trail.


The other problem you have with all these cash payments to mates, I bet they won't be keen on a income tax investigation if you try to get them included in the expences

HMRC asked for my name, but nothing on my location. And the guy on the phone actually suggested moving in to eliminate CGT, but he never said how long for, but I have read something on the HMRC website about 3 years which I couldn't quite make sense of.

From my understanding it's the decision of the solicitor whether or not HMRC need to be notified. What if I move in with my brother and my girlfriend and she gets pregnant within that year? The home wouldn't be suitable and it would be necessary to move. There are genuine reasons people like to move home other than avoiding CGT. Would this still not be acceptable? People have said there is no set time before moving out, but if suspected I could still face CGT.

zygurat789

StarsDie wrote: »

HMRC asked for my name, but nothing on my location. And the guy on the phone actually suggested moving in to eliminate CGT, but he never said how long for, but I have read something on the HMRC website about 3 years which I couldn't quite make sense of.

From my understanding it's the decision of the solicitor whether or not HMRC need to be notified. What if I move in with my brother and my girlfriend and she gets pregnant within that year? The home wouldn't be suitable and it would be necessary to move. There are genuine reasons people like to move home other than avoiding CGT. Would this still not be acceptable? People have said there is no set time before moving out, but if suspected I could still face CGT.

You keep mentioning solicitor. There is a whole tranche of the law which solicitors don't really venture into and that is tax law. This is the province of specially qualified legal experts, they specialise in tax law and they are called accountants. However, as with all other specialists make sure you consult an appropriately qualified accountant. Your solicitor should be able to recomend one.

grey_gym_sock

moving in - supposing that you do establish your residence to HMRC's satisfaction - doesn't automatically eliminate the whole CGT liability. it only eliminates a proportion of the gain, based on the period you are resident, but always including the last 3 years of ownership (that's where the 3 years comes in to it).

e.g. suppose house is eventually sold for £140k and its value was £40k when it was transferred to you. so total gain = £100k.

you each own 50% of it, so you each have a gain of £50k.

if you've established residence (but lived there for less than 3 years) then 3 years are exempt. suppose the total time you owned the house was 7 years. then 3/7 of £50k = £21,429 is exempt, leaving £28,571 not exempt. from that you deduct your annual CGT allowance (this year, £10,900), leaving £17,617, on which you pay tax at 18% or 28% (i.e. between £3180.78 and £4947.88 tax payable).

holly_hobby

As stated, its you whom informs HMRC of a CGT liability via annual SA rtn.

You don't qualify for full PRR for the full period of ownership (even if HMRC are happy this is now your perm residence), because as prev discussed, you didn't occupy it from ownership (or within the first 12 mths as per improvement regs allow) and can't essentially backdate residency.

GreyGymSock has given you guidance on the final 3 yr exemption ruling, and also v kindly worked out your current estimated (based on 140k sale price) CGT liability (don't forget you can also offset from your profit any valuation, professional and disposal costs associated with the sale, so as to recoup your outlay in administering the sale).

As also stated, you could choose not to report it, claiming (if HMRC come calling) ignorance of CGT property regs and PRR relief (ie it only being applicable for actual periods of residency + final 3 yrs), and take on the chin what they dish out (if they believe it an genuine error and not tax avoidance).

Hope this helps

Holly

PS - some HMRC links for you to have a read through to help with understanding....

CGT on property basics ...
http://www.hmrc.gov.uk/cgt/property/basics.htm

CGT regs on property otherwise claiming PRR re unoccupancy/absences during ownership
http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm

PRR guide - refer to page 3 period of ownership which discusses splitting gains where the dwelling did not always act as your primary residence durint your beneficial ownership
http://www.hmrc.gov.uk/helpsheets/hs283.pdf