capital gains tax advice

savinglikemad

could some one throw some light on my situation, I have asked what if problems before but now need advice on my current situation. I brought house A morgage free in April 2005, all family lived in it. Oct 06 I took out £130,000 mortgage to enable son to buy house that needed extension and renovation, HOUSE B (I pay morgage via my account he pays me back, and has always done so.) It could not at that time be brought with a mortgage. He moved into it took out a loan to carry out the work, but after few months and few relationship problems gave up. I in desperation to get my money back I agreed to buy his house and finish work. I sold my house and had to transfer £70,000 of the mortgage to pay him what he has spent. This also meant I had no redemption fee to pay back. However due to credit crunch, change of his job he has had trouble getting mortgage, so his completion date is about month behind me. I decided not to move into house B immediatly as we would all have to live together, bad idea, he has dog, I have dog cats, also main thing is house still needs loads of walls knocking out, new kitchen, walls plastered gardens totally wild, not good for dog. It seems a better idea to move to house C (which is what I have done) House C is one I have owned since aug 02 and rented it from then til 5.1.08 I have had it up for sale since 20.1.08 hoping to raise some cash to complete house B. It has all we require is tidy and a haven to walk back into after house B war site. I only intend to live there til sold, or house B complete/livable. which should be about 4 to 6 months at least. As after six months aware I will have two sets of coucil tax to pay, and house B is high banded. What is my tax position re house C do I have to inform Inland Revenue of my electon of prime residence, or the fact that I am living there, post here, bills accumalaing here, spent money making it my house (back access fro second car, fences, even estate agent has taken new photos cause it has transformed place to home.

jimmo

If I have read your post correctly you have already sold House A and have already moved or are about to move. Basically you have lived in House for the whole period of ownership. Therefore there are no tax or Capital Gains Tax issues here.
In about October 06 your son bought House B, lived there and at some time later he sold it to you. Your son seems to be in a similar situation. There are no tax or CGT issues for him.
You have bought House B from your son but have not (yet) moved in.
As things stand you are potentially liable to CGT when you sell House B. Because you and your son are connected persons for CGT purposes the amount you paid your son is totally irrelevant for CGT purposes and you are deemed to have acquired it at open market value. It might be a good idea to get it valued to properly reflect the state of repair/dis-repair at the date of your acquisition. Again, as things stand, House B may be a residence but it is not your residence and there is no question of you being able to elect for it to be your main residence.
You have owned House C since Aug 02 and put it up for sale on 20/1/08. Quite frankly, if you put it up for sale before moving in the taxman is going to be extremely sceptical that you moved in in order to make it your “permanent” home. He is going to take an awful lot of convincing that your sole purpose of moving in was not purely to manipulate Private Residence Relief.
Now, regarding House B Extra Statutory Concession D 49 http://www.hmrc.gov.uk/manuals/cg4manual/CG65000.htm effectively gives you up to a year from the date of purchase to make it fit for use.
So, if you take up to a year from the date of purchase to do all the repairs and then move in you will qualify for main residence relief from the date of purchase and there are no knock-on effects for the house you are living in whilst the work is being done.
I’m definitely no tax planner but I think that if you took House C off the market for the time being and put it back on the market later when the repairs and improvements to House C are nearing completion that would be a lot more convincing to the taxman.

savinglikemad

sorry jimmo, dont think my post was very clear, I am going to move into house C and live in it, no qestion of it going up for sale, I think it will be a beautiful when its done, so it will be my residence once I move in, as may be there for several years, so that is not a capital gains tax issue my problem is house B I am living there at moment, and intend to until house c is done, or if house B sells, and therfore I have to move out, my question really is as I am living in house B (And you really could not live in house C at moment, may even apply for unhabitable from council) do I not qualify for prime residency on house B as I am and will be the next few months be living there.

savinglikemad

sorry can i bump this up, as I have only had one reply

reckit

I have heard that cgt is 18%,does this apply to the sale of part of my garden of residence.I know there was no tax before april 5th 2008.
Any advise welcome:rolleyes: