capital Gains Tax on main residence

ioscorpio

A guy at work today said that if you sell your main residence and do not buy another property in the UK or move abroad, then you are liable to capital gains tax, he said he had a friend who works at the tax office who tracks down people abroad who still have a tax liability in this country.

theGrinch

I would have thought that an urban legend....your main residence is exempt...full stop.

ioscorpio

That's what I said, but he said not if you sell up and move abroad, because you have not re-invested it into another property in this country.
He also has a mate who is a builder who started with a 2 up 2 down and bought and sold over the years and now has a big gaff in Devon who is worried about having to sell the house to pay the tax bill.

Copied from government website
Private residence relief is the name given to the tax relief designed to ensure that most people don’t face a Capital Gains Tax bill when they sell their home "to move to another".

Ian_W

From: http://www.hmrc.gov.uk/leaflets/cgtfs1.htm#b9

What about my home?

You will not have to pay CGT when you dispose of your home if all the following conditions are met.

* Throughout the period that you owned it, it was your only home.
* You did actually use it as your home all the time that you owned it.
* Throughout the period that you owned it, you did not use it for any purpose other than as a home for yourself, your family and no more than one lodger.
* The house and garden do not exceed 5,000 square metres (about one and a quarter acres - roughly the size of a football pitch).

Even if not all of these conditions are met, you may still be entitled to relief against all or part of the gain.

I don't think the purpose to which you put the proceeds is relevent. If it were the same principal would apply to those moving from owning to rented, or owning to sharing with someone else. Even if all the conditions are not met fairly convoluted reliefs are available, for example if you move out and rent it out for some years, then move back I believe the last 3yrs and the 1st period are exempt.

I think the builder may be a different issue, the Revenue may have decided he has being using private residence relief to disguise a business of buying, doing up and selling on property. Only a guess, but it doesn't make sense otherwise cos CGT is only payable AFTER a gain, so until he sells his maison he doesn't have one.

I'm with theGrinch on this one, but why don't you post on the tax thread? Lots of knowledgeable accountants hang out there.