2 houses - CGT?

waterbaby

I'm not sure whether this or the Cutting Tax section is more appropriate, but here we go.

My granny owns a house. In the next few days she is buying a flat, as well as the house. She will move into the flat, and then sell the house.

I know that you don't pay capital gains tax on your primary residence. But because she will own two residences at the same time, does that make her liable for capital gains tax (or any other kind of tax) when she sells the house?

garysletters

As long as she sells the house reasonably soon after buying the flat, and doesn't rent it out to anyone in the meantime, she will be OK.
If she were to rent it out, she would hit CGT problems.

icedfusion

You can sell the '2nd Property' upto 3 years from moving into the new property without being liable for capital gains tax.

GarysLetters states that if you rent it out during this period then you may be liable for capital gains - I am unsure how this affects the point I made above. However, so long as the house is not declared as being used for renting and that you are in fact trying to sell it for this duration, the CGT does not have to be declared.

ice.

telly-addict

Following the decision in Griffin v Craig-Harvey, you need to make an election (S222 (5) TCGA 1992) as to your principal private residence within 2 years of owning a second property. If this is not done, when a property is sold the Revenue will look as a matter of fact which your main property was, i.e. where you lived the longest, received post, which property is used for the electoral roll etc.

Whether you receive rent or not, if you own two properties, only one can be your PPR and consequently there must be a capital gains tax charge upon sale of the other.

From what you have said, there is only a matter of weeks overlap. The property she is selling will not be liable to CGT as it has been her PPR, and the last three years of ownership are always considered as qualifying for PPR.

So no, she won't have to declare the gain on the house. The IR appreciate that sometimes it is not feasible to sell one property and move into another on the same day.