Main Residence Tax Liability

[Ian999]

HI,

Wondering if someone could help me out here, as I am not all that cluded up on tax rules.

I have bought a 2 bed apartment to live in - the property was repossesed and as a result I bought the property for £130k.

Now living in the property for 2 months, I have decided I no longer wish to live there and want to sell the property - my question is would I have to pay any capital gains tax (as I would now be looking to sell the property for £160k). My quiery is more related to the fact that I have only lived in the property for 2 months, and that I will not be buying another house straight away - I will be moving back in with my brother.

I would appreciate it if someone help

Thanks

[Tax Accountant]

HI,

Wondering if someone could help me out here, as I am not all that cluded up on tax rules.

I have bought a 2 bed apartment to live in - the property was repossesed and as a result I bought the property for £130k.

Now living in the property for 2 months, I have decided I no longer wish to live there and want to sell the property - my question is would I have to pay any capital gains tax (as I would now be looking to sell the property for £160k). My quiery is more related to the fact that I have only lived in the property for 2 months, and that I will not be buying another house straight away - I will be moving back in with my brother.

I would appreciate it if someone help

Thanks

You should note that if you bought the property to make a gain, you will be denied the benefit of main residence exemption for CGT.

Although no set period is mentioned in the legislation to establish main residence for CGT purposes, a period of approx 6 months residence is generally a good starting point to demonstrate that the property was not bought primarily with a view to make a gain.

Having said this, if the property was geniunely bought for use as your main residence and actually used as such since purchase, there should be no problem provided you are able to supply evidence of your use of the property as your main residence if challenged by the tax office.

Whether a property was actually used as a main residence or not is a question of fact. Some of the pointers would be the method of loan to buy the property (ie bought with a normal mortgage or a short term loan from a bank), registration as residence for Council Tax purposes, registration of all utilities in your name, change of your address to the new property for your bank, employer, tax office etc.

On the face of it, the tax office could be excused for being suspicious and thinking that you bought the property to make a quick profit because you bought a re-possessed property, sold it within a couple of months and moved back with your brother. This may very well be a property developement disguised as a purchase for your own residence. If so, it could be taxed to Income Tax or capital gain without any benefit of main residence exemption.

Ramnik