Capital Gains Tax on Property Sale

jengarooster

Hi

My parents are downsizing to a flat. They will be moving before their current home is sold. So when they do sell their current home I think CGT will be payable as it will no longer be their main residence. I believe there is a grace period of 9 months after you move out but it may be extended to 36 months if the owner is disabled . Can anyone confirm if that's correct please?

eskbanker

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64986

jimjames

I can't see that CGT will be due if they are moving from one house to another as long as they're not intending to retain the current house. They might have to pay extra stamp duty and claim it back though.

jengarooster

Thanks eskbanker for the info re the exemption period. Do you know if we need to gather any evidence for HMRC to prove that the exemption applies?

jengarooster

Thanks jimjames. They're not intending to keep the current house but we're expecting it will take some time to sell, it needs modernising. You're right they will have to pay stamp duty on the flat but we can claim it back when the current home sells.

DRS1

https://forums.moneysavingexpert.com/discussion/comment/82093262#Comment_82093262

I may be a bit thick but if the parents are buying the new flat and it could qualify as their PPR then does this 36 month period apply?

Growingold

https://forums.moneysavingexpert.com/discussion/comment/82093331#Comment_82093331

You say it needs modernising before sale. To avoid all the hassle of doing this could be taken into account in the sale price and also then the new owners could make their own mark on it.

gwynlas

Agree with above

It might sell quicker as a doer upper requiring modernisation rather than already done especially if it is in a reasonable habitable state that someone could work on at their own pace

Unless completed to a very high standard modernisation rarely pays in terms of sale price

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82093626#Comment_82093626

There is certainly a live question as to whether CGT is relevant at all, which will depend on the detailed circumstances at the time, but I was just linking OP to the 36 month exemption for disabled folk…

sherlock228

https://forums.moneysavingexpert.com/discussion/comment/82093319#Comment_82093319

the evidence is there on the Land Registry record and SDLT return, date of purchase of new home and date of sale of old home.

If sale is within 9 months of purchase then no CGT (or 36 months if meeting the criteria to be classed as "disabled") because the sold property was the main home for its entire ownership period (unless there are other facts you have not mentioned)

Private Residence Relief (PRR) applies to both properties simultaneously for the duration of that exemption ("grace") period, hence no need to evidence which is the main home in that period,

DRS1

Private Residence Relief (PRR) applies to both properties simultaneously for the duration of that exemption ("grace") period, hence no need to evidence which is the main home in that period,

The bit in bold was what I was wondering about in the case of the 36 month grace period. Because one condition for the 36 months is

"the individual does not have any other relevant right in relation to a private residence.

An individual has any other relevant right in relation to a private residence at the time of the disposal if at that time:

the individual owns or holds an interest in a dwelling-house (or part) other than that in relation to which the gain accrued, …, and
s222 TCGA92 could apply to that interest"

I am sure I may be missing something but that does read as if the 36 month extension does not apply if you have bought another home (and so you would be stuck with the normal 9 months).