Lodgers and CGT

PaulAA_2

Hi all,

In what circumstances having multiple lodgers gives rise to CGT when selling? Does the number of lodgers matter or a number of rooms let, and surely the duration of the let must be taken into account. How are these facts verified?

How is the CGT situation different if the flat is being let as an assured shorthold tenancy?

Thank you.

nidO

If you have multiple lodgers you will probably want to get advice from a tax specialist, or simply ask HMRC themselves - HMRC guidance is that if you have 1 lodger you still qualify from full relief and no CGT is due.

If you have more than one lodger however CGT will usually be due for the period during which you have multiple lodgers, but this apparently is flexible and depends on exact circumstances (if you have a 6 bedroom house and 5 lodgers HMRC will likely deem you to be running a lodging business and give you no relief, for example, if you have an 8 bedroom house with only 2 lodgers however you might get it).

When letting out an entire flat you don't get any relief for the period you let it out. The exception is for the last 18 months upto selling the property if at any time you have ever lived in the flat.

booksurr

nidO wrote: »

(if you have a 6 bedroom house and 5 lodgers HMRC will likely deem you to be running a lodging business and give you no relief, .

I doubt you have a source for that??? the question is what is the "entity" being let not how many rooms does it have
If the LL has only one multi bedroom property and the LL lives in it then case law says it matters not how many bedrooms there are
http://www.hmrc.gov.uk/manuals/cgmanual/cg64723.htm

HMRC guidance is more than one lodger results in CGT liability as more than 1 lodger constitutes a boarding house business, not whether there are 2 or 6 bedrooms
http://www.hmrc.gov.uk/manuals/cgmanual/cg64702.htm
you would therefore be entitled to letting relief instead of your private residence relief

whilst lodger is not defined, it is obviously referring to real people not households (cohabiting couple = 2 people) or number of bedrooms

http://www.hmrc.gov.uk/manuals/cgmanual/cg64713.htm

HappyMJ

PaulAA wrote: »

Hi all,

In what circumstances having multiple lodgers gives rise to CGT when selling? Does the number of lodgers matter or a number of rooms let, and surely the duration of the let must be taken into account. How are these facts verified?

How is the CGT situation different if the flat is being let as an assured shorthold tenancy?

Thank you.

Can you explain what you mean by let as an assured shorthold tenancy? Lodgers don't have a tenancy they have a licence to occupy the room. You can remove them at any time without any notice at all. They have no rights.

A tenant has exclusive possession and use of the whole property and has a AST.

It's a bit of a grey area as you've seen by the responses so far. It's quite flexible. If you're letting a room or two out in your home just to get some help in paying a share of the mortgage interest and a share of the household bills without making any real money you usually won't have a CGT liability. If you're relying on letting rooms as your only income you may do.

Cisco001

More than one lodger will lost PPR according HMRC. But you will subject to letting relief.

i was looking for those information a while a ago.

However, I haven't been able to work out the how exactly it calculate. It seems too complicated to me. I read somewhere it is calculate as part let your home.

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

See example 8 for part let calculation.

booksurr

HappyMJ wrote: »

It's a bit of a grey area as you've seen by the responses so far. It's quite flexible. If you're letting a room or two out in your home just to get some help in paying a share of the mortgage interest and a share of the household bills without making any real money you usually won't have a CGT liability. If you're relying on letting rooms as your only income you may do.

no, you are misunderstanding the posts, if you have more than one lodger you lose the right to claim PRR on the bit being let but become eligible to claim letting relief, there is no grey area about that at all

your idea that CGT liability is somehow linked to whether it's a "main" source of income is just plain wrong

booksurr

nidO wrote: »

- HMRC guidance is that if you have 1 lodger you still qualify from full relief and no CGT is due.

correct

nidO wrote: »

If you have more than one lodger however CGT will usually be due for the period during which you have multiple lodgers,

correct

nidO wrote: »

but this apparently is flexible and depends on exact circumstances (if you have a 6 bedroom house and 5 lodgers HMRC will likely deem you to be running a lodging business and give you no relief, for example, if you have an 8 bedroom house with only 2 lodgers however you might get it).

incorrect, more than 1 lodger is all that matters

nidO wrote: »

When letting out an entire flat which you have never lived in at all as your main home you don't get any relief for the period you let it out. You will be liable to CGT for the entire time it was not your main home whether it was let or not during that period of ownership

On the other hand you will be entitled to claim letting relief during the period it was let plus private residence relief during the period you lived there [STRIKE]The exception is for [/STRIKE] and the last 18 months (assuming that does not overlap with your actual occupation) up to selling the property if at any time you have ever lived in the flat.

as amended above