Capital gains on home

Wig

UK citizen has owned 1 house in UK since 1979
worked as ex pat abroad for most of the time, however been living in said property as retired in UK since about 2000.

Has bought another residence property in UK in April 2015 and has moved out of original property in October 2015 into second property.

How long to sell the first property to avoid capital gains?
Does it make any difference if it is on the market or not on the market?

thanks.

CLAPTON

Wig wrote: »

UK citizen has owned 1 house in UK since 1979
worked as ex pat abroad for most of the time, however been living in said property as retired in UK since about 2000.

Has bought another residence property in UK in April 2015 and has moved out of original property in October 2015 into second property.

How long to sell the first property to avoid capital gains?
Does it make any difference if it is on the market or not on the market?

thanks.

you have the last 18 months of ownership exempt
whether it's on the market or not is irrelevant

Wig

Sorry but what does that mean? It was occupied by himself until October 2015, now I live there for a few months only before it is put on the market.

Is it, if he sells it in the eighteen months following October 2015 (the date he left the property and started living somewhere else) then there will be no capital gains tax? and if it takes longer to sell than 18 months from October 2015 then he will have to pay capital gains tax?

It has increased in value some £350,000 over the 35 years.

If it looks like it's not going to sell within the 18 months, would they be looking at moving back into the property as the main residence to try to reset the 18 months ?

grey_gym_sock

there's going to be some tax to pay.

first, since the property has been owned since before march 1982, you use its value in march 1982 as the cost, instead of the purchase price. (that's probably a bit higher than the purchase price.)

so the overall gain is the sale price minus that valuation, also minus costs of sale (solicitors, estate agents). (so that's probably a bit less than £350,000.)

then a proportion of the overall gain is exempt, based on the proportion of the time (from march 1982 to sale) in which the property was the owner's primary private residence. but the last 18 months of ownership counts as exempt, regardless of whether the owner lives there during that period. so after moving out in october 2015, the period up to april 2017 is exempt.

let's suppose the property is sold in march 2017. and that the exact month that the owner took up residence in the property was march 2000. then there are 18 years which are not exempt under PPR (march 1982 - march 2000), and 17 years which are exempt (march 2000 - march 2017).

on those assumptions, 17/35 of the overall gain is exempt under PPR. so if the overall gain is £350,000, £170,000 is exempt, which leaves £180,000.

assuming the property has been let when the owner wasn't living there (for at least some of the time), then there is also a deduction for letting relief. but this is limited to £40,000. which still leaves a taxable gain of £140,000.

unless the taxpayer has capital losses which are available to set against that gain, then all he can do is deduct the annual capital gains tax allowance from it - this year: £11,100 - and pay tax on the remaining £129,900 - mostly at 28%, though some of it will be at 18% if he's not already a higher-rate taxpayer.

booksurr

grey_gym_sock wrote: »

there's going to be some tax to pay.

first, since the property has been owned since before march 1982, you use its value in march 1982 as the cost, instead of the purchase price. (that's probably a bit higher than the purchase price.)

so the overall gain is the sale price minus that valuation, also minus costs of sale (solicitors, estate agents). (so that's probably a bit less than £350,000.)

then a proportion of the overall gain is exempt, based on the proportion of the time (from march 1982 to sale) in which the property was the owner's primary private residence. but the last 18 months of ownership counts as exempt, regardless of whether the owner lives there during that period. so after moving out in october 2015, the period up to april 2017 is exempt.

let's suppose the property is sold in march 2017. and that the exact month that the owner took up residence in the property was march 2000. then there are 18 years which are not exempt under PPR (march 1982 - march 2000), and 17 years which are exempt (march 2000 - march 2017).

on those assumptions, 17/35 of the overall gain is exempt under PPR. so if the overall gain is £350,000, £170,000 is exempt, which leaves £180,000.

assuming the property has been let when the owner wasn't living there (for at least some of the time), then there is also a deduction for letting relief. but this is limited to £40,000. which still leaves a taxable gain of £140,000.

unless the taxpayer has capital losses which are available to set against that gain, then all he can do is deduct the annual capital gains tax allowance from it - this year: £11,100 - and pay tax on the remaining £129,900 - mostly at 28%, though some of it will be at 18% if he's not already a higher-rate taxpayer.

we should at least consider the rules around periods of absence...

let me make an assumption - if the property was NOT let whilst the OP was working abroad then he retains PRR for the whole period he was away as it falls under the rule "absences during which you are in employment and all your duties are carried on outside the United Kingdom". This assumes of course that the overseas job was a result of your redeployment abroad by a UK employer rather than you moving overseas and getting a job with an overseas employer.

if it was an overseas employer or you let it at all during your overseas period then grey gym sock's calculation would apply in such cases

Wig

Ok thanks,

It was a UK employer for most of the time abroad, the last 8 or so years was for an USA employer, and it was only let for a few (2 or 3) years whilst he was under the UK employer, the rest of the time it was either empty or occupied by the (adult)children.

So wiill the solicitor who does the conveyancing deal with all the CGT calculations or does he need an accountant to do the CGT bit?

booksurr

Wig wrote: »

So wiill the solicitor who does the conveyancing deal with all the CGT calculations or does he need an accountant to do the CGT bit?

unlikely a conveyancing solicitor will have the expertise to do the CGT, nor for that matter would some high street accountants

best to find an accountant (or chartered tax adviser) who is experienced in property related CGT and "overseas" owners

jimmo

booksurr wrote: »

we should at least consider the rules around periods of absence...

let me make an assumption - if the property was NOT let whilst the OP was working abroad then he retains PRR for the whole period he was away as it falls under the rule "absences during which you are in employment and all your duties are carried on outside the United Kingdom". This assumes of course that the overseas job was a result of your redeployment abroad by a UK employer rather than you moving overseas and getting a job with an overseas employer.

if it was an overseas employer or you let it at all during your overseas period then grey gym sock's calculation would apply in such cases

Whilst it is quite right that periods of absence need to be considered I fear it is dangerous to assume they exist without checking.
A period of absence is defined as starting at the end of a period of occupation. (Condition A)
http://www.hmrc.gov.uk/manuals/cgmanual/CG65046.htm
In this particular case the property was bought in 1979 but, Capital Gains were effectively restarted on 31 March 1982. It is then necessary for there to be a period of occupation ending after 31 March 1982 for a period of absence to commence.
http://www.hmrc.gov.uk/manuals/cgmanual/CG64920.htm
So, if the property was bought in 1979 but never occupied by the owner until his return to the UK in 2000 there have been no periods of absence.
If the property was bought and occupied in 1979 but the owner moved abroad before 31 March 1982 HMRC’s attitude would certainly be that there have been no periods of absence.
Personally, I am not so sure about that but its not my money that’s at stake.
However, moving on, if a period of absence exists there is absolutely no difference between being redeployed abroad and moving abroad to a new job. Also there is no difference between whether the employer is a UK employer or foreign employer. The only question is “Is the owner in an employment and all of the duties are carried on outside the UK?”