Another question about CGT and related topics.

letiss7

Hi, my wife & I bought a house in June 1997. We lived there as our main residence until July 2019. At that time we chose to move closer to where my wife worked and the children went to school by renting a property.  We used the original a few times a month so we didn't rent it out. We now want to sell the house. Having read the CGT guide on the gov.uk website it seems like we will need to pay CGT on as the price of the property has increased quite a bit since we bought it. 
I have a few questions:-
1. If asked (not sure who would ask) to prove that we did not rent out the property, would something like utility bills be good enough proof?
2. I don't think we have all of the paperwork for the solicitor's fees, stamp duty etc from when we bought the house. Will an estimate of the buying costs be good enough for the CGT calculation?
3. We had a had a loft conversion done while we lived in the property which was handled by a specialist loft conversion company and as part of the agreement they arranged for the building regs. I'm sure the approval is in the paperwork but as of yet I have not found it, would that be a problem when it comes to selling the house? The loft conversion was done about 8 years ago if that has any relevance.
Thanks in advance for any help.

Jeremy535897

1. The period of occupation as your main residence plus the last 9 months of ownership are exempt, so if you sold this month, around 90% of the gain would be exempt. You are unlikely to be asked to prove it was your main residence. Utility bills are not evidence (you were presumably still paying them on the house you own when your main residence was in the rented property).
2. You can try asking the solicitor you used to buy the property. They are unlikely to be significant. Stamp duty rates are here, depending on whether the precise date of the transaction was before 8 July 1997 or on or after that date:
https://www.stampdutyrates.co.uk/historic-rates.html
3. Ask your estate agent. You should be able to get a copy from the council, probably involving a fee. You can add the cost of the loft conversion to the cost of the property to work out the capital gain (and any other enhancements reflected in the property's current value).

Mickey666

When people have more than one house they have to declare one of them to be their main residence and they don't incur a CGT liability when they sell it because of PRR. 

In this case, it seems to me that the OP had one main residence but chose to live in a rented property for a couple of years.  However, it could still be regarded as their main residence, in which case when they sell there should be no CGT.  It's not clear if the OP is moving back into the house before selling it, or whether they are selling it because they wish to stay in the rented house, though I'm not sure it's particularly relevant as long as it's designated as their main residence.

I think I'd be inclined to just sell it as normal and not worry about CGT.  After all, the house was never rented out so the OP had permanent access to it even though they were renting another property.  Whose to say they did not return to the main residence every weekend?  I've known people who lived away from their main home during the week while working too far away to commute, but I've never thought that could result in a CGT claim when it comes to selling their house.  Also, since the OP only actually owns one house and it has never been rented out, the chances of anyone questioning a perfectly normal sale of a family home seems pretty minimal to me.

letiss7

Thank you both for your insights.

Jeremy535897

I should add that whilst I agree that the comment about having to declare one of the properties as your main residence is incorrect, you can elect to choose one of them as a main residence, so long as you live in both, as appears to be the case here (I had overlooked the reference to occasional stays at the owned property). That election must normally be made within two years of the second property being acquired or rented (which it may still be), but if, as in this case, the capital value of the second property is negligible, that time limit can be extended if need be (section 222(5A) TCGA 1992, which replaced ESC D21). This article (written before the legislative change) explains the point:
https://tax.bloomsburyprofessional.com/blog/cgt-main-residence-election-some-points-to-note-about-the-election
By making the election in favour of the house they own, rather than the rented property, the OP achieves the desired outcome, without having to worry about anyone questioning anything, at least for as long as they occasionally do live in the house they own (at least until 9 months before the sale).

letiss7

The gain is quite a lot, on paper at least as we haven't sold the property yet. I wasn't aware of the declaring 1 residence as your main residence until recently when we started to consider selling the property. As we moved out in July 2019 we are close to the 2 year limit.

dctrgre

You have your annual allowance of £12,300 each. If you decide that you don’t have PRR for the whole period of ownership your PRR will be roughly 22 years (actual occupation) + final 9 months (automatic) out of about 24 years. 

Back of an envelope calc says the (joint) gain would need to be about £470k before you have any tax to pay.

Jeremy535897

letiss7 said:

The gain is quite a lot, on paper at least as we haven't sold the property yet. I wasn't aware of the declaring 1 residence as your main residence until recently when we started to consider selling the property. As we moved out in July 2019 we are close to the 2 year limit.

The normal time limit 2 years from the date you started renting the second property, but as I said earlier, it can be extended if your interest in the second property has no capital value. I suggest you make the election within the normal time limit, as there is nothing to be gained by failing to do so.

letiss7

Thank you both for your responses. 
The gain won't be as high as £470K so that is nice to know as an approximate figure to keep in mind.
I agree it dos seem sensible to make the election regardless of whether I need to use it or not in the future.