capital gains question

jopsey · 5 December 2005 at 12:07AM

I have a property that i have rented out for 6 years i am considering moving back into this property as its empty at the moment,would i still be liable for capital gains on this property if i sold it at a later date

valgee · 5 December 2005 at 10:26AM

I can't answer your question on capital gains although I think it depends on how long you have lived in a property before letting it out as to how much capital gains you pay.

I also have a question that maybe someone can answer, and that is I have sold my house and I haven't put all the money into another property i.e. I have bought a flat and saved the rest, will the excess be liable to any tax at all?

roger_c · 5 December 2005 at 8:58PM

If you live in your home for 3 years the dwelling place is your principal private residence and this qualifies for full capital gains exemption. So Jopsey if you live in the property for 3 years then you will be ok, and the same to Valgee if you lived in the property for 3 years you should be ok.

That's my sketchy knowledge of capital gains on property anyway!

Ian_W · 5 December 2005 at 10:25PM

Hi jopsey & valgee,
I think rog_c may be slightly mistaken but he's along the right lines with the 3 years.

Valaghee, if the house you sold was your principal private residence [PPR] money from selling it [with limited exeptions] is totally exempt from CGT. Whether you use all, some or none of it to purchase another prop is up to you, the proceeds of the sale of your PPR are exempt.

Jopsey, a bit more complex but, as I understand it, if you move back in then sell it you would be exempt for 3 years prior to the sale date. Has to genuinely be your PPR, notify IR, have letters delivered there etc, etc. So if you moved in now and a sale went through on 1.3.06 you'd be exempt from CGT for period back to 1.3.03 but the increase in value from when you started letting/purchased the prop until 03/03 would still be subject to CGT. You would have reliefs and and your personal CGT allowance to reduce the liability.

One final problem with that scenario though. Where are you living now? If you own that prop as well, you can only have one as your PPR at once so there is a possibility of some CGT liability on that one. Very complex [or potentially so] but those, I believe, are the basics however I would suggest you pay for some professional advice.

jopsey · 6 December 2005 at 1:09AM

Thanks it is all very complicated as i thought, will get in touch with accountant when she is back off her holidays to see whats my best option and yes i do own the property i live in now CGT is something i have very little knowledge of but i knew somebody on here would be able to give me the basics thanks again

valgee · 6 December 2005 at 10:15AM

Many thanks Roger C and Ian W. You have put my mind at rest as both answers apply to me.

nigeats · 29 December 2005 at 9:53PM

Ian_W wrote:

... Has to genuinely be your PPR, notify IR, have letters delivered there etc, etc. So if you moved in now and a sale went through on 1.3.06 you'd be exempt from CGT for period back to 1.3.03 but the increase in value from when you started letting/purchased the prop until 03/03 would still be subject to CGT.

Hello. Read your message with interest. I am concerned with CGT as we all should be at 40% or so. I am selling a rented out property that I used to live in 18 months ago. I have submitted an SA and am not liable for additional tax as I was not in profit whilst letting. Is there any way round, using legal loop holes, that I can utilise, to ofset CGT? ie, notify the Tax Man that I am back living at my rented out property. Have my mail, like the Gas, Electric and Council Tax (for which I accept I am now liable) sent to me at this address. Would this suffice to the Tax Man that this is now my PPR? Hope you can assist, Thanks...Nigeats.

gallygirl · 31 December 2005 at 10:02AM

I have a BTL house which, after court action to evict tenants, will hopefully become vacant.

OH and I having some probs so I am serioulsy considering moving in to it (its in my name only). Problem is, although this would be my principle residence, I see it only as a short term solution (in a bad area, would prob prefer to sell up & relocate closer to work in the medium term). I've never lived in property.

On this thread the suggestion seems to be needs to be 3 years before considered main residence. I thought this related to the oposite scenario - i.e. if you let a house that previously was main residence there was no CGT for 1st 3 yrs of letting. Do you def need to live there 3 yrs AFTER letting - can't find anything on IR website to specify this.

Also, does anyone know if this is called Lettings Relief or is that something else, if so, what??????

:xmassmile

Ian_W · 31 December 2005 at 5:30PM

ali007 wrote: On this thread the suggestion seems to be needs to be 3 years before considered main residence. I thought this related to the oposite scenario - i.e. if you let a house that previously was main residence there was no CGT for 1st 3 yrs of letting. Do you def need to live there 3 yrs AFTER letting - can't find anything on IR website to specify this.

Ali,
There's a HMR&C helpsheet HERE dealing with residential relief. I'm no accountant and I think you may need to consult one to be sure but my reading of it is that if at any time the prop is your principal private residence [PPR] you can claim it for the period it was your PPR and the final 3 years of ownership.

Under period of ownership it says :
The final 36 months of your period of ownership
always qualify for relief, regardless of how you use the property in
that time, as long as the dwelling-house has been your only or
main residence at some point.

In your particular circs, the 2 would overlap, but I don't believe you need to live there for 3 years, you just get relief on the final 3yrs ownership by virtue of the fact it has been your PPR at some time. Someone else posted a link to the revenue site [sorry, can't find it] which suggested that the test of whether or not it is your PPR is factual, not based on a set period of time. So you could live there a short period as your PPR and still claim the 3 years providing it was genuinely your PPR and you notified HMR&C and could show you had actually been living there, ie change address with banks, credit cards etc, etc.

So you could move in there once you get the tennants out, nominate it to IR then put it up for sale with the final 3yrs qualifying for relief. The rest of the time you owned would be subject to CGT but you may be elligable to taper relief, letting relief and have your £8.5k allowance to reduce this.

nigeats wrote: I am concerned with CGT as we all should be at 40% or so. I am selling a rented out property that I used to live in 18 months ago.

See above - your final 3 years ownership, if you lived there first and only let for 18 months should be exempt and BTW CGT isn't 40% unless you're already a higher rate tax payer or your gain takes you over the threshold.

HEALTH WARNING: CGT is a very complex tax so do get professional advice. I'm not qualified, only giving a personal opinion based on some experience which I believe is correct but as they say, a little learning ...

capital gains question

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