Capital gains tax

ruth56_2

Trying to fathom out whether we will have to pay cgt  in the following situation...
Own a cottage in Suffolk which we have lived in as main residence for three years plus.
Have a house in Kent we lived in for thirteen years then have let out for the last five years.
Plan is to move back to Kent for a couple of years and rent out Suffolk property. Then sell house in Kent and move back into Suffolk. The money would not be used to immediately but another property but we are considering selling the Suffolk house and investing the two sales money to buy one bigger house.
I understand all the ways to calculate the actual tax but not sure if there will be a liability and if so, on which property? Advice would be really appreciated! 

p00hsticks

Without buying and selling prices and costs it's impossible to say whether anything  will actually be payable, but I think both will be potentially liable, as there are going to be periods of ownership for both where it is not your principal residence. But I'm not an expert.

Jeremy535897

The Kent property is subject to capital gains tax on approximately 5/20ths of the gain (using whole years). The Suffolk property would be subject to capital gains tax in respect of the period it is not used as your main residence (and the last 9 months is exempt).

ruth56_2

Thanks all! While waiting for the forum, I finally got through to HMRC and they advise me that there is NO liability as we will be in main residence in Kent and it will be sold as such. We would then have the Suffolk cottage as our main residence which, when sold will be our only house. It took quite a while for them to get to this answer but they have noted our conversation on my record and say there will be no issue! So a bit of a result.

Jeremy535897

I don't think that is the correct analysis. It does not suffice that the property is your main residence when sold, otherwise you could let a property for twenty years and then move into it for a month or two before selling it and avoid all the tax.

One point I should have mentioned is that where you occupy a property as your main residence both before and after a period of non-residence, you can exempt a further three years. That would still not exempt all your gain on the Kent property, as there is a five year period of non-residence (although if your non-residence is job related, as defined, you can benefit from further exemptions).

tacpot12

I'd agree with Jeremy535897, I don't think you have been correctly advised by HMRC. Advice from HMRC will depend on whether you explain the situation correctly to them. If you tell them something that is incorrect, or miss out some part of the story, they might tell you there is no liability, but unless you have this in writing, and provided them with all the figures to calculate the laibility, they won't stick by their advice. There are penalties for not paying CGT within 30 days of the sale of the property,  so you need to be sure of the situation before any property transaction completes.  

It would be safer to have a read of this and figure it out for yourself:

HS283 Private Residence Relief (2021) - GOV.UK (www.gov.uk)

Sibbers123

ruth56_2 said:

Thanks all! While waiting for the forum, I finally got through to HMRC and they advise me that there is NO liability as we will be in main residence in Kent and it will be sold as such. We would then have the Suffolk cottage as our main residence which, when sold will be our only house. It took quite a while for them to get to this answer but they have noted our conversation on my record and say there will be no issue! So a bit of a result.

This is incorrect. It is pretty basic stuff even for someone with relatively little knowledge of the UK tax system. I am very surprised HMRC got this wrong (they often get more complex matters incorrect).

You will pro rate the gain between periods of actual occupation (exempt from CGT), periods of deemed occupation (also exempt) and periods of absence (subject to CGT).

The amount of CGT (if any) will depend on the gains you have made, your other income and the availability of the annual exemption for CGT.

[Deleted User]

ruth56_2 said:

Thanks all! While waiting for the forum, I finally got through to HMRC and they advise me that there is NO liability as we will be in main residence in Kent and it will be sold as such. We would then have the Suffolk cottage as our main residence which, when sold will be our only house. It took quite a while for them to get to this answer but they have noted our conversation on my record and say there will be no issue! So a bit of a result.

I cannot believe that this is the advice that you have been given - I am sure that it ‘did take a while for them to get to this answer’.  I would also be concerned that you seem to be relying on the conversation being noted as something to fall back upon in the future. It will count for nothing!

The advice from tacpot12 above should be heeded.

p00hsticks

tacpot12 said:

I'd agree with Jeremy535897, I don't think you have been correctly advised by HMRC. Advice from HMRC will depend on whether you explain the situation correctly to them. If you tell them something that is incorrect, or miss out some part of the story, they might tell you there is no liability, but unless you have this in writing, and provided them with all the figures to calculate the laibility, they won't stick by their advice. There are penalties for not paying CGT within 30 days of the sale of the property,  so you need to be sure of the situation before any property transaction completes.  

It would be safer to have a read of this and figure it out for yourself:

HS283 Private Residence Relief (2021) - GOV.UK (www.gov.uk)

I'm wondering if the conversation/advice has inadvertently ended up being about additional SDLT rather than CGT......

[Deleted User]

p00hsticks said:

tacpot12 said:

I'd agree with Jeremy535897, I don't think you have been correctly advised by HMRC. Advice from HMRC will depend on whether you explain the situation correctly to them. If you tell them something that is incorrect, or miss out some part of the story, they might tell you there is no liability, but unless you have this in writing, and provided them with all the figures to calculate the laibility, they won't stick by their advice. There are penalties for not paying CGT within 30 days of the sale of the property,  so you need to be sure of the situation before any property transaction completes.  

It would be safer to have a read of this and figure it out for yourself:

HS283 Private Residence Relief (2021) - GOV.UK (www.gov.uk)

I'm wondering if the conversation/advice has inadvertently ended up being about additional SDLT rather than CGT......

I do, sincerely, admire your optimism.

p00hsticks

[Deleted User] said:

p00hsticks said:

tacpot12 said:

I'd agree with Jeremy535897, I don't think you have been correctly advised by HMRC. Advice from HMRC will depend on whether you explain the situation correctly to them. If you tell them something that is incorrect, or miss out some part of the story, they might tell you there is no liability, but unless you have this in writing, and provided them with all the figures to calculate the laibility, they won't stick by their advice. There are penalties for not paying CGT within 30 days of the sale of the property,  so you need to be sure of the situation before any property transaction completes.  

It would be safer to have a read of this and figure it out for yourself:

HS283 Private Residence Relief (2021) - GOV.UK (www.gov.uk)

I'm wondering if the conversation/advice has inadvertently ended up being about additional SDLT rather than CGT......

I do, sincerely, admire your optimism.

Indeed. It's very worrying if a HMRC rep - even if only a call centre rep just following a script - has got it so fundamentally wrong otherwise.