Second property.

satphil

Hi.
We reside at a property that we own and are mortgage free. We also own a 2nd property with a small mortgage, owned for 10 years approx. We have never lived at the 2nd property.
If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

Keep_pedalling

No, you will be able to claim residential relief for the period you live there but you will have to live there a lot longer to have any serious impact on CGT.

p00hsticks

Keep_pedalling said:

No, you will be able to claim residential relief for the period you live there but you will have to live there a lot longer to have any serious impact on CGT.

And it sounds as if they are not proposing to move into the second property at all , so absolutely no impact on any CGT liability in that case

satphil said:

If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

  

[Deleted User]

p00hsticks said:

Keep_pedalling said:

No, you will be able to claim residential relief for the period you live there but you will have to live there a lot longer to have any serious impact on CGT.

And it sounds as if they are not proposing to move into the second property at all , so absolutely no impact on any CGT liability in that case

satphil said:

If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

  

I believe that the op may believe, incorrectly, that because only one home is now owned it will be free of CGT. 

Obviously it is where one lives that is paramount. 

p00hsticks

[Deleted User] said:

p00hsticks said:

Keep_pedalling said:

No, you will be able to claim residential relief for the period you live there but you will have to live there a lot longer to have any serious impact on CGT.

And it sounds as if they are not proposing to move into the second property at all , so absolutely no impact on any CGT liability in that case

satphil said:

If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

  

I believe that the op may believe, incorrectly, that because only one home is now owned it will be free of CGT. 

Obviously it is where one lives that is paramount. 

And as Keep peddling has already pointed out, just because it becomes your main residence, the fact that it hasn't always been so means that there will still potentially be a CGT liability. 

Grumpy_chap

satphil said:

Hi.
We reside at a property that we own and are mortgage free. We also own a 2nd property with a small mortgage, owned for 10 years approx. We have never lived at the 2nd property.
If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

No.
You will incur CGT.
Think of it as a fortunate position to be in.

Bookworm105

satphil said:

If we were to sell our main residence move into a rental home for a year could we then sell 2nd property and avoid capital gains tax.

the most obvious of all CGT tax dodges and therefore a ploy that was closed down almost as soon as CGT was invented. CGT relief is given for the period in which your property was your main home during the time you owned it. Owning it whilst not your main home makes that period liable, as there is no way to cancel out that historical fact.

% of total ownership period the property was main home = 100% relief from CGT
% of total ownership period the property was NOT the main home = 100% liable for CGT

CGT total gain (selling price - purchase price) deduct main home relief (% of time main home / total ownership period) = amount subject to CGT 

ALSO bear in mind there is case law where HMRC have successfully convinced courts that even though someone only owed one property at the time, there was no actual INTENTION to make it a meaningful main home. Their occupation was merely a temporary guise done purely to evade tax. The courts thus disallowed any claim for relief and left the person liable to CGT for the entire ownership period of that property/

Relief from CGT as a "main home" is not about HOW LONG you lived there, rather it is about why and what were you doing whilst living there (the "quality of occupation")