CGT and home ownership

edindie

Hi,
One of my brothers, my Mum and I all share ownership of a flat in Edinburgh. The plan is to sell it sometime in the next year and buy a house in London as that would be much more useful (both my brothers live there) and easier to maintain.

My brother used to live in it and had it solely in his name, and when he moved down to london we rented the flat to students and changed it so that 3 of us owned it. If we were to sell it now we'd have to pay some £20k CGT and I'm trying to find out if there is a way we could not have to.

For example, I know that if it is someone's primary residence we don't have to pay CGT when selling, but we rent it out now. Can we just say that we live there? Neither me nor my two brothers own a different house so it could be possible. If this is possible, how long would someone have to live there to get out of the CGT?

I'm not hugely knowledgeable on the subject, so any help would be greatly appreciated.

Captain_Mainwaring_2

edindie wrote: »

Hi,
One of my brothers, my Mum and I all share ownership of a flat in Edinburgh. The plan is to sell it sometime in the next year and buy a house in London as that would be much more useful (both my brothers live there) and easier to maintain.

My brother used to live in it and had it solely in his name, and when he moved down to london we rented the flat to students and changed it so that 3 of us owned it. If we were to sell it now we'd have to pay some £20k CGT and I'm trying to find out if there is a way we could not have to.

For example, I know that if it is someone's primary residence we don't have to pay CGT when selling, but we rent it out now. Can we just say that we live there? Neither me nor my two brothers own a different house so it could be possible. If this is possible, how long would someone have to live there to get out of the CGT?

I'm not hugely knowledgeable on the subject, so any help would be greatly appreciated.

"Can we just say that we live there?" you mean you haven't being declaring your rental income...?

I believe that you need a year's residence, but you would get taper relief and need to look at the allowances.

I'd have a quick consultation with an account.

edindie

Captain_Mainwaring wrote: »

"Can we just say that we live there?" you mean you haven't being declaring your rental income...?

I haven't really had too much to do with that side of things tbh. I'm assuming that everything is declared and above board.

silvercar

edindie wrote:

I haven't really had too much to do with that side of things tbh. I'm assuming that everything is declared and above board.

Hmm. On your tax return you would be declaring one third of the imcone and having one third of the expenses.

Anyway CGT is different to income tax.

The basis of the CGT calculation is the difference between the purchase price and the sale price less buying and selling expenses.

Your brother has lived in it as his PPR previously, so he would be exempt from CGT for the time it was his home and the last 3 years of ownership. Any intervening period would be calculated as a percentage of the whole time.

For you and your other brother you would look at the difference between the acquired price (ie when you were given the third share, or market value if you did a deal with your brother) and the sale price. One third of that is yours.

Captain_Mainwaring wrote:

I believe that you need a year's residence, but you would get taper relief and need to look at the allowances.

Taper relief ceased to exist from 5 April this year. You have a CGT allowance of 9,600 if not used elsewhere and pay CGT at 18%.

To claim it as your PPR you would have to move in go on the electoral role, change all addresses including the address registered with your employer and credit cards. The Revenue is not stupid. Whereas 6 months would probably be sufficient but it does need to be genuine.

Your brother presumably accounted for the sale of thirds to you and your other brother at the time:) so only has his third to account for now, he is likely to have a lower bill than you due to PPR.

If you want an idea of the likely bill, post original purchase price and month/ year, the month/year you acquired your share. The value at the time you acquired your share and the likely sale price.