CGT concerns-please help

andrewlato

Hi all,
I've been let to believe recently by a colleague that over last few years I may have broken some CGT rules without realising it. Please can I get some solid advice, so both me and wife can sleep well again...;-)))

In Nov 2005 we purchased our first home together (house number 1 with mortgage) for 81250, we were not married then. In June 2008 we bought second home(mortgage) for 90k, as we knew then, that partners family will be coming soon to live in UK, so they could live in house number 1. We were asked by solicitors if house number 2 will be now main residence, and we said YES(not sure if this nomination went onto some LR tax form or something).House 2 needed major works to it, so did not moved in there until late 2008.After moving into house 2 , we let house 1 to family members at no cost( waiting till market recovered). We sold house number 1 in August 2011 for 74k (at loss). We got married in Nov 2011(not sure if it changes anything).
We lived in house 2 until October 2012 and sold it then for 139k(paper profit 49k). We bought house 3 in October 2012 for 40k cash, again declaring it to solicitors as main residence. We put it on the market in late 2013 and bought house 4 in dec 2013 for 89k cash and yes we declared to solicitors this is going to be main residence from now on. House 4 needed major works again so I moved in to it in Jan 2014 and wife with child moved in April 2014, when House 3 sold for 68k.We are still living in house 4 at present.
Does any of this trigger CGT and why? I have never contacted HMRC or received any correspondence from them relating to any of these transactions. I am not sure if I should have done SA after each transaction??? I have been in continues employment for last 10 years on PAYE. Wife was working FT -PAYE-until Dec 2012 then become stay at home wife. We have spent on all improvements between 5-25k (on each house) but it will be difficult to find all invoices now. I was led to believe years ago that I'd never be liable for CGT if I was to buy, do up, live in(at least 6 months) and sell my main home-is this still the case please? Should there be an outstanding issue over this- how HMRC get in touch demanding explanation, and how long do that have since transaction dates to question possible unpaid CGT? Is there something like 'expiry date' for HMRC to chase it up? We have never declared any of the houses to HMRC as main residence( didn't know we should have done it), however we always had all the bills in our names and addresses were changed at banks etc to prove we were living there.
and final question - can we do it again? ie buy house no 6, sell no 5 at profit and not be liable to pay CGT or should I somehow setup Ltd company and use it for future property purchases?

Regards

Andre

booksurr

please use paragraphs rather than a wall of text, it is rather hard to follow your ramblings!

read this, it is all you need to know about the workings of CGT:
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet

in your case:
house 1: exempt Nov 05 - "late" 08 as main residence. Sold in Aug 11 so the final 3 years rule applies meaning your deemed occupancy period was Sept 08 - Aug 11 when it was also exempt. Depending on exact dates you have no period when liable to CGT on it to start with. Even if there is, you sold at a loss anyway

house 2: Totally exempt. No CGT. Purchased June 08. Sold Oct 12. Classed as main residence for whole period of ownership (to be pedantic the period between June - "late" 08 is covered by the exception for works undertaken in the first 12 months of ownership).

house 3: Totally exempt. No CGT. purchased Oct 12 sold April 14 was (marital) main residence throughout ownership.

House 4: CGT irrelevant. Still living there and not yet sold.


your understanding that if you buy, do up and live there 6 months is wrong. CGT is not based on such a simple idea. Indeed, if that is what you intentionally set out to do, HMRC could in fact say you are a property developer not a property investor, and so are actually liable for income tax not CGT since your purpose is to buy and sell for a profit as a business. However, it is unlikely that would apply in your case since you have simply owned and used 4 houses as family homes. The fact you have "added value" to each before selling is incidental to their use as your (marital) home.

Keep_pedalling

If you have a CG liability it needs to be declared via self assessment, but I do not believe you have anything to worry about.

Once you had purchased house 2 and declared that as your main residence then any CG would only have applied to house one, but you made a loss on that so no tax due. House 2 was your declared as your main residence the whole time you owned it so nothing to declare there either.

House 3 you made a profit of £28k and was your main residence or a year for which you are entitled to private residence relief. You also get that relief for your final 18 months of ownership which together covers the entire period of ownership, so you don't owe anything there either.

andrewlato

thank you for your replies,much appreciated.
We are relieved that we haven't broken any tax laws!

If there were issues in my case, how long HMRC would have had to pick them up? Is there time limit on it?

Andre