2 homes, PPR & CGT

PaulCooper

I'm looking for some guidance regarding PPR. I will employ an accountant to make sure I do things correctly, but need to get an idea of the direction before progressing that far.
I own 2 properties
property A, owned for 22 years (still live here)
property B, owned for 1 year.
If I transfer my PPR to property B (and live in it) from 04 2015, will my CGT be as follows
Property A, CGT payable on any gain after 04 2015
Property B no CGT payable


Thanks for any comments
Paul

CLAPTON

PaulCooper wrote: »

I'm looking for some guidance regarding PPR. I will employ an accountant to make sure I do things correctly, but need to get an idea of the direction before progressing that far.
I own 2 properties
property A, owned for 22 years (still live here)
property B, owned for 1 year.
If I transfer my PPR to property B (and live in it) from 04 2015, will my CGT be as follows
Property A, CGT payable on any gain after 04 2015
Property B no CGT payable


Thanks for any comments
Paul

no




1. the GAIN is the difference in price between the selling price and the buying price less any buy/sell costs or improvements


2. however if you lived in the property at any time as the owner then you are able to claim some exemptions


a. you get the last 18 month exempt
b. the time you actually lived there exempt
c. if you let it then you can claim some letting relief (max 40,000)




and you have a cgt allowance of 11,000

PaulCooper

Hi CLAPTON
Thanks for replying, although I'm not sure I understand the answer.
Property A, I've lived in for 22 years, never rented it out, so during that time it's been my PPR. From what you say, if I transfer my PPR to property B, surely the 22 years gain on property A are exempt? Any future gains on property A would of course be subject to CGT (less my allowance)
If the PPR now becomes property B, won't this (property become exempt as I will be living there?


Thanks for clarification
Paul

CLAPTON

PaulCooper wrote: »

Hi CLAPTON
Thanks for replying, although I'm not sure I understand the answer.
Property A, I've lived in for 22 years, never rented it out, so during that time it's been my PPR. From what you say, if I transfer my PPR to property B, surely the 22 years gain on property A are exempt? Any future gains on property A would of course be subject to CGT (less my allowance)
If the PPR now becomes property B, won't this (property become exempt as I will be living there?


Thanks for clarification
Paul

lets say you sell your house A is 5 years time for 200,000
and lets say you bought it for 50,000


then gain would be 200,000 - 50,000 = 150,000
less say buy/sell cost 10,000 so net gain is 140,000


period of ownership = 22+5 =27 years or 324 months


you are entitled to


22 years plus last 18 month exempt so
140,000 x 282/324 = 121,851
if you simply keep it empty for the five years then you total exemption would be


121,851 plus 11,000 (cgt allowance) = 132,851


so liable to tax at 18 or 28% on 7,149




Property B works the same way : the first year when you weren't living there isn't exempt

PaulCooper

Hi CLAPTON
OK got it, thanks for the clarification, I'll have to think a bit deeper, unless of course there is something blindingly obvious that I'm missing that will allow me to minimise my Capital Gain on properties?


Thanks
Paul

CLAPTON

I haven't enough data to be able to comment further;


would need to know your plans for both properties and the purchase prices and likely selling prices

Spidernick

Unless the rules have changed, surely OP can make a PPR election (within two years of having two properties) to treat property B as his PPR from day one, irrespective of whichever is the actual PPR? OP doesn't even have to live in property B. It's only where no election is made that HMRC will decide what is the de facto PPR (in this case property A currently).

I also think that if both properties are the PPR at some stage (and both lived in at some stage from memory) then the 18 month additional deemed PPR period would apply to both properties, whereas post #4 implies this isn't the case. Similarly two lots of letting relief are possible in certain circumstances.

Please correct me if I'm wrong, but this type of 'flipping' (if I can coin a term from MP's expenses!) used to be fairly common when I dealt with CGT much more than I do now.

CLAPTON

Spidernick wrote: »

Unless the rules have changed, surely OP can make a PPR election (within two years of having two properties) to treat property B as his PPR from day one, irrespective of whichever is the actual PPR? OP doesn't even have to live in property B. It's only where no election is made that HMRC will decide what is the de facto PPR (in this case property A currently).

I also think that if both properties are the PPR at some stage (and both lived in at some stage from memory) then the 18 month additional deemed PPR period would apply to both properties, whereas post #4 implies this isn't the case. Similarly two lots of letting relief are possible in certain circumstances.

Please correct me if I'm wrong, but this type of 'flipping' (if I can coin a term from MP's expenses!) used to be fairly common when I dealt with CGT much more than I do now.

if the OP has two homes then yes he can elect which one is his PPR within two years and so could elect to make B his PPR from day one
this may or may not help him depending upon what his plans are for A and B over the longer term


The 18 months isn't 'additional' it is the 'final' 18.


Certainly if he sold the A house now then it would be beneficial to opt for B as his PPR from day one and use the 18month rules for A.

kidmugsy

In general, I take it that one couldn't opt for "B" as PPR if it is let to somebody?

CLAPTON

kidmugsy wrote: »

In general, I take it that one couldn't opt for "B" as PPR if it is let to somebody?

no, flipping or opting which is PPR can only occur if both are genuinely your own residences : so letting is obviously outside PPR

booksurr

kidmugsy wrote: »

In general, I take it that one couldn't opt for "B" as PPR if it is let to somebody?

correct, you cannot nominate a property as PRR if it is not available for use as an actual residence.

Note "use" in that context does not mean you have actually moved in yet, but it does absolutely preclude you owning it and then claiming it is your residence when in fact it has been let and so is now incapable of being used as your residence.

Obviously if you buy a second property, do not move in, but nominate it as your PPR within 2 years, and then at some later date actually let it, that means it will of course lose its PPR status wef the date it is let as it would then be entitled to letting relief on the basis it has previously been a qualifying "main" residence