Capital gains tax- only property

sarah_hhhhhh

We lived in a house for 3 years. Moved for husbands new job where we had to live in a house owned by the school he worked for. We have rented the house we own for 3.5 years and have paid tax on the rental income. We are now selling that house. It’s the only house we own. We were under the impression we had to pay capital gains tax on it but someone today told us we wouldn’t as it’s our only property. Anyone know?! 

xylophone

https://www.litrg.org.uk/tax-guides/other-tax-issues/capital-gains-tax/capital-gains-tax-sale-your-home
As well as this, certain other periods may be fully relieved from tax provided that you lived in the property as your main home at some time both before and after the period of absence:

• Any absence up to a maximum of three years (this may be one absence or a series of absences which total three years);
• Any absence where throughout that absence you were employed overseas and all your duties were performed overseas; and
• Any absence up to a maximum of four years (this may be one absence or a series of absences up to four years maximum) where either:
  • You worked too far from the property to use it as your home; or
  • You were required by your employer to live somewhere else.

sarah_hhhhhh

Yes, but it says we had to live in it before AND after the period away, which is not the case. So I think we are liable? 

I’ve had so many different opinions!

xylophone

Try this
https://www.gov.uk/tax-relief-selling-home
and if still in doubt, ring HMRC to check.
https://www.gov.uk/government/organisations/hm-revenue-customs/contact/capital-gains-tax-enquiries-for-individuals-employees-and-self-employed

oldbikebloke

let us assume that you will exchange contracts for the sale of the property after 5th April 2020, so it falls under the new rules (letting relief has been abolished and the final period is reduced to 9 months ).

The requirement to claim under job related accommodation is that there must be an intent to live in the property, not actual living. So, you lived there for 3 years, that is beyond question. However, at what point did you decide you would sell and NOT return to the property?
In principle you can claim PRR up to the date you made your decision, obviously proving that could be entertaining if challenged, as there will be nothing on paper to support it? (or will there - see comments below re final tenancy agreement dates)


So, for example, it appears you have owned the property for 6.5 years and will now sell it. Let us say it takes a further 3 months to reach point of exchange of contract for sale (the CGT trigger point for the "disposal"). So total ownership period 81 months 

of those 81 months, the first 36 are auto exempt as you lived there. In addition, because of that fact, the final 9 months of ownership are also deemed exempt  So in total 45 months can be claimed under Private Residence Relief whatever else happens

Next you need to consider your intentions and the letting ….  the fact you occupied job related accommodation is beyond question, so at least part of that period will be added to PRR as patently at the point you started to let your "old" house you still intended to return to it. 

Has the school job ended? Has the tenancy now ended? If the tenancy ended after you left the school house then your intent to reoccupy is quoshed. So your claim for job related PRR would last only until you the start date of the last tenancy agreement issued, as that has now overlapped your leaving the school and therefore your intent to return could not apply if the tenancy meant the property was at point unavailable to be occupied

if tenancy has ended before you leave the school house, then we are back to your decision date for when your intention to reoccupy changed. 

As you can see you have the final 9 months period to play with, so the date you "decided" not to re-occupy could fall in that period and therefore ensure that the entire ownership period remain exempt under PPR since the intent ended during a period when the property is exempt anyway: lived in, deemed final period, and actual job related periods

read this:
 https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64555