Capital gains tax question

deano2099

Complicated situation, just wanted some advice to ensure we're doing the correct thing:

Partner's father passed away in January 2021, partner was sole beneficiary and executer, probate granted March 2021, and partner inherited a flat. Between March 2021 and September 2021 we were both living with my parents. We moved into the flat in September 2021 and lived there until July 2022, when we completed on a joint purchase of a new house.
We're now marketing the old property, selling next year, and trying to figure out the potential capital gains tax liability.

September 2021-July 2022 is clearly exempted under PPR as this was where partner was living for that period.
I think March 2021 to August 2021 is still exempted as this is the only property she held an interest in, so could be nominated as her "main residence", despite her not living there?
July 2022 - March 2023  will be exempt under the "final 9 months" if we sell by March 2023. But if we sell after that is where I get confused. We think partner might still be able to nominate the flat as her main residence for tax purposes, as we are not married? But we're also concerned as the mortgage on the new place requires the property to be our "main residence" but I don't know if that means either from a tax perspective, or is just meaning we have to live there most of the time?

It's confusing as the rules around "main residence" for CGT seem different to those for Stamp Duty - you just nominate one rather than having to actually live there?

Possibly not relevant but: we had the flat valued at probate, it was valued low as it was in a state of disrepair: bare walls, no doors or door frames, hot air heating system left unsafe. I'd say it was uninhabitable but sad to say partner's father was inhabiting it. I know "redecoration" costs wouldn't normally be factored into capital gains on a property, but would they in this situation?

Mutton_Geoff

For complicated CGT situations, the value of the advice you're going to get on an internet forum is worth exactly what you will have paid for it. I'd recommend spending £300 on a tax advisor to submit your accounts/tax return. Any mistake is going to cost you much more than that.

deano2099

Yeah we may well have to go that route, just with the relatively low value of the property (five figures) and the exemptions that definitely apply plus the allowance, the actual CGT due won't be much more than that so was hoping to avoid it.

Mutton_Geoff

deano2099 said:

could be nominated as her "main residence", despite her not living there?

It's phrases like this that make me uncomfortable and imply tax fraud. The CGT calculations are based on time owned/occupied as main residence rather than values at points in time. HMRC will only be interested in a probate value and then selling price and CGT calculated according to the % it wasn't your main residence.

As an example, I bought a house that was then let for two years whilst I got planning permission to redevlop. I had two agents revalue it prior to works starting to "prove" it hadn't risen much in price over that time and I moved in as my main residence. The work was done over the next two years then I sold it for 2.5x the price I paid.

HMRC charged me 50% of the CGT figure as I'd occupied it only half the time I owned it regardless that all of the capital appreciation occurred whilst it was my main residence. I offset the improvement works against the tax to reduce my £75k CGT bill   

deano2099

Mutton_Geoff said:

deano2099 said:

could be nominated as her "main residence", despite her not living there?

It's phrases like this that make me uncomfortable and imply tax fraud. The CGT calculations are based on time owned/occupied as main residence rather than values at points in time. HMRC will only be interested in a probate value and then selling price and CGT calculated according to the % it wasn't your main residence.

Yup me too! Unfortunately the guidance on the HMRC website says "If you nominate a property as your main home you qualify for relief for most of the time you live away. You must have lived in the home as your only or main residence at some point while you owned it."

That you *can* nominate a main residence (and HMRC provide instruction on how to do so) rather it just being based on where you spend most of your time (as it is for SDLT) is part of what is confusing me. 

Mutton_Geoff

The risk of nominating another place is only if you own another at the same time and then you expose that one to CGT for the period you didn't have it nominated as your main residence. But you said you stayed with parents so assuming no other CGT liabilities outside this property.

Personally I'd still get a tax expert to cast their eyes over it. Over the years I've been using accountants, they have saved me their fees many many times over.