Capital Gains Tax on "original" main residence?

Hi,

I'd be grateful for advice.

The scenario:

Property A bought in 1995 in London (main and only residence). Job relocation in 2000 to Devon. Tried to sell property A and rented in new location. Unable to sell A so rented out property from April

2001(wife and kids moved out at this time to join me in Devon). Fed up with renting in Devon so bought second property B in May 2002. Tenants have left Property A and am planning to sell it.

It was my main residence for over 5 years. It ceased to be, because of relocation, in April 2001 (i.e. when wife moved out).

Am I liable for CGT on the original property A given that it hasn't been my main residence since April 2001? Am I allowed a period of time to sell my original "main" residence before I'm liable for CGT? How will I be taxed on any profit when I come to sell residence B?

Thanks for your help,

Mark

Reply to
Mark
Loading thread data ...

Good. Well-peppered with relevant facts.

Yes, in principle, but in practice all the taxable gain is likely to be cancelled by relief. If you sell in April 2004, then the 36 months from then back to April 2001 will qualify for Private Residence Relief for no better reason than that it has at some point during your ownership been your PPR. Clearly it was your PPR from 1995 to 2000, so at most that would leave the period between 2000 and 2001 uncovered. During that time you had two residences (the old and the rented) and it can be argued that because your wife and kids were still in A, that A continued to be your main residence, and the rented one was secondary.

Accordingly, property A had actual primary residence status from 1995 all the way up to April 2001, and so your whole period of ownership is covered by actual PRR entitlement for the first part and "36 month rule" PRR entitlement for the last 3 years.

If you find it takes longer to sell, then the start of the 36 month period will open a gap, but that gap should be covered by Lettings Relief, so you're in luck.

Yes, basically 36 months.

You won't, if it will have been your PPR from acquisition in May 2002 until you sell. Although you cannot have two different PPRs at the same time, there is no clash in the overlap period from May 2002 until whenever you sell A, because only actual PPRs can clash. The 36 month rule deemed PPR status for A does not endanger the actual PPR status for B.

Reply to
Ronald Raygun

Thanks for the helpful and comprehensive reply. One web resource

formatting link
has a section on PPR and relief. The following paragraph is quoted from an article by Jennifer Adams:

"There is no minimum period of occupation for PPR but the house has to be occupied before and after any period of absence unless the reason for the absence was that the owner was working away; then he does not have to go back to the house if his work subsequently requires him to reside elsewhere. If the reason for the absence is work abroad then any period of absence no matter for how long is allowable. If work just takes him elsewhere within the UK then the rules are not so lenient - he is only allowed an absence of four years."

I relocated to Devon purely for employment reasons - my job required me to move. I would also be unable to move back to London before selling property A as my work requires that I stay in Devon. Would I therefore be elligible for a 4 year "absence"?

Mark

Reply to
Mark

I don't think this part of the article is relevant to your case. You don't need to "move back" to re-assert your PPR status over property A. You and your wife cannot have different PPRs at the same time. This really has to be either A or the rented place, and there's no point it being the rented place, so it had better be A.

Reply to
Ronald Raygun

The message from Ronald Raygun contains these words:

Would this also be true if the couple had decided to separate, sell up the family home and buy two smaller houses. One in each house? What if they decided not to divorce? Jim

Reply to
J L Williams

Each would be entitled to PPR exemption.

Reply to
Doug Ramage

BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.