Do I pay CGT?

siouxchief

Hi,

Quick clarification please. If I built a second home on my corner plot but before it finished I sold my primary residence and went into rented. If I then sell the second home will I pay cgt although at the time it's no longer a second home? Maybe I would need to move into it for a bit from my rented but unsure.

May be a silly question but gotta ask.

Thanks

Surrey_EA

My understanding that you would need to have occupied the second property as your primary residence for 2 years to avoid CGT.

siouxchief

Thanks. Found this which is interesting (add ww.):

The-self-build-guide.co.uk/self-build-capital-gains.html

"Building In Your Garden

If you own an existing property and want to build your new home in the garden then move from one to the other, it is generally accepted that as long as the first is sold within 12 months of completion of the new home, capital gains tax will not be chargeable on either property. It is possible in some circumstances to negotiate a 12 month extension to this with the Inland Revenue."

siouxchief

I wonder if I built it for my daughter and put in her name how that would work too although she would be at uni elsewhere...

Bluebirdman_of_Alcathays

siouxchief wrote: »

I wonder if I built it for my daughter and put in her name how that would work too although she would be at uni elsewhere...

Would she have funded it? Would she have owned the land it was built on?

Sounds to me like tax avoidance - which is a criminal offence. Your link also refers to the Inland Revenue - an entity that hasn't existed for 10 years, so that doesn't fill me with confidence.

What would be plausible is to build house 2, move into it when it's completed. Make sure you make a tax election to HMRC. Sell house 1 within 18 months, and there is no CGT to pay on that. Sell house 2, as it is now your primary residence, and you have lived in it continuously since it was built. No CGT there either.

If you are a builder or there is any other evidence that building houses is a badge of trade, then it could get sticky and you'll need a lawyer as well as an accountant.

http://www.theguardian.com/money/2014/apr/18/second-home-owners-capital-gains-tax

siouxchief

Thanks bluebird, very useful info :beer:

Two questions for you, what do you mean by:

"Make sure you make a tax election to HMRC" and if it's an amount/percentage to be paid what is it?

Also following your ideal scenario above is there a rule as to how long you need to wait before selling house 2?

Thanks

siouxchief

Thanks everyone, I got all the info I needed which is great. Will give up on daughter idea and as bluebird suggested and as booksurr advised stay longer than 6 mths in house 2.

Cheers