capital gains query

andrew8018

Here Goes

My parents have just sold a small flat in London and have kindly offered to buy a house in Hastings which myself, my wife and my son will live in whilst my parents would stay there part of the year. We are currently renting a 1 bed flat in London and can't afford to rent anything bigger or buy anything ourselves.

Although they haven't asked for anything, I have insisted that we pay them about £250 a month rent. Whilst they are very happy with this, they recently suggested that entering into this arrangement may mean that they'd be liable for capital gains tax when they come to sell in 3-5 years. Does anyone know if this is the case? My view was that whilst they plan to register at the address themselves and get on the electrol register and stay there for about 2-3 months of the year I didn't think this would be so. They would be spending the rest of the year in their other house which is in Dublin and I'm not sure if this complicates the tax issue further!

Can anyone enlighten me on this matter?

Many thanks

Andrew

silvercar

what they do with it the rest of the time is upto them, I don't think whether they rent it to you or whether it is empty is significant. What matters is whether the Inland Revenue accepts that it is their Principal Private Residence. If it is, then all gains would be tax free. If it is not then they would potentially pay CGT on the sale. The question is whether, if it is their only UK residence they could get away with calling it their main home. The answer is probably "yes" as it is their only home in the UK, but it could depend on where they work.

Best to phone up the revenue without giving your name or take advice from a tax specialist, there are really funny rules about tax agreements between countries and where they are domiciled.