Does a residential canal boat attract capital gains tax when it is sold?

soupdog

For many years my son has lived on a canal boat in London. (He is paying off a small family loan on part of the purchase cost over a 5 year period at about £400 a month with a couple of years to run). Even though the boat is his main residence, the Canal & River Trust insist that house boats must move to a different mooring every fortnight. Consequently, as he doesn't have a fixed address unless he permanently moored in a marina, he registered himself at my address for voting purposes and to have an address for correspondence. Two years ago he went abroad and rented his boat to a friend for about £400 a month to cover the loan but he returns permanently to the UK in a few weeks.

Question: Am I correct that if and when he sells the boat he would be liable for capital gains tax unless he can prove it is his main residence. If so, how can he prove it is his main residence without having a fixed address for the boat. The only 'address' he has is mine. This must be a common problem for people living on canal boats. Any advice would be much appreciated

caprikid1

Is he going to sell it for more than he bought it for ? He has an allowance of c10K a year. I would suspect he is unlikely to be making that much money.

soupdog

Yes, he bought it in a poor state for £50k and could probably get nearer £80k for it now after all the work he has put in (for which he probably has not thought to keep any receipts) but that would still be less than £10k a year 'profit'

Keep_pedalling

caprikid1 said:

Is he going to sell it for more than he bought it for ? He has an allowance of c10K a year. I would suspect he is unlikely to be making that much money.

Current allowance is £12,300 but dropping to £6k in April.

Boats, like cars, are considered depreciating assets so are exempt so no he won’t have a CGT liability however much profit he makes. The downside to this is you can’t use any losses to offset gains on other assets.

ProDave

If he has to move to a different mooring every fortnight, it is NOT a residential canal boat, but a "continuous cruiser"  

I would think it is no different to if he bought a holiday boat and sold it a few years later for more than he paid.

Tax free CGT amounts are reducing in April.

Definitely account for ALL the costs when trying to offset expenses against gains.  But you only get ONE CGT allowance when you sell, not "one per year you have owned it"

MX5huggy

A boat (and for HMRC a barge is a boat) is a wasting asset (expected life less than 50 years) like a car (even expensive classic cars) no Capital Gains tax is due on sale. https://www.accaglobal.com/us/en/technical-activities/technical-resources-search/2018/april/capital-gains-and-chattels.html

Just to clear up a couple of things the CGT allowance is currently £12300 falling to £6000 in April and £3000 the year after. You can’t roll up previous year’s allowances to cover a gain made over a number of years. 

soupdog

Thank you all for your replies. Extremely useful, especially the link to a 'Wasting Chattel'
At least that's one thing off our minds. (Kids - you never stop looking after them!)

caprikid1

soupdog said:

Yes, he bought it in a poor state for £50k and could probably get nearer £80k for it now after all the work he has put in (for which he probably has not thought to keep any receipts) but that would still be less than £10k a year 'profit'

Unfortunately capital gains tax does not work like that, you can only utilise a CGT allowance in the year you dispose of the asset.

This is why it is common for people to "Bed and breakfast" shares IE Sell them and buy them back to realise a capital gain and then right it off against tax. So if the boat were deemed an asset liable to CGT then the allowances of the years owned but not claimed would be of no value. There does seem to be conflicting advice on the net around boats but I think as has been mentioned previously without a fixed mooring it is a lot more likely it could be accepted as merely a depreciating asset.

A Boat = A whole in the water into which you poor money....

propertyrental

Even though the boat is his main residence, the Canal & River Trust insist that house boats must move to a different mooring every fortnight.

If he had a residential mooring he would not need to move every fortnight. He could register his narrowboat with CRT at that address.

Since he does not appear to have a residential mooring, he has to register as a 'Continuous Cruiser'. Although there is some flexibility on the 'every fortnight' rule, especially in winter and/or when locks are closed for repair, CRT are toughening up on owners who outstay their welcome by blocking up temporary mooring sites for longer periods.

Unfortunately, outside of marinas, residential moorings are in short supply and high demand.

user1977

I would be surprised if anybody ever makes a capital gain on a boat. I read somebody describing the experience of owning a houseboat to being similar to sitting in a cold bath while ripping up tenners...

Linton

Is a narrowboat a depreciating asset?   A quick google tells me that a depreciating asset is one with a useful life of less than 60 years.  Most narrowboats  are constructed from solid steel and if properly maintained could well have a useful life of 100 years or more.   There are ex-working boats on the canals dating back certainly 80-90 years.

In recent years second hand narrowboats have greatly increased in price due to the increased price of steel and the cost of the labour to build a new one.  So a capital gain of above the new CGT allowance would crttainly seem possible.