CGT - can I avoid it?

[steve-morris]

Hello All,

I am currently living in rented accommodation with friends & have no desire to move at the moment. Due to nagging parents I have brought a property of my own which I intend to let out for a couple of years until I am ready to move into it myself.

My questions are;
1 - Can I register the property as my main residence for a short period of time to benefit from the GCT 3 year relief rule? If yes - how can I do this?

2 - When I eventually move into the property myself (within 3 years), how long will I need to remain resident there to sell it without any capital gains tax liability? If I can that is.

I hope my questions make sense, responses would be much appreciated

Thanks

[Tax Accountant]

Hello All,

I am currently living in rented accommodation with friends & have no desire to move at the moment. Due to nagging parents I have brought a property of my own which I intend to let out for a couple of years until I am ready to move into it myself.

My questions are;
1 - Can I register the property as my main residence for a short period of time to benefit from the GCT 3 year relief rule? If yes - how can I do this?

2 - When I eventually move into the property myself (within 3 years), how long will I need to remain resident there to sell it without any capital gains tax liability? If I can that is.

I hope my questions make sense, responses would be much appreciated

Thanks

You have to use it as your home for it to qualify for PPR relief. If it qualifies for PPR relief, you will also have the final 3 years of ownership also exempted to the extent that it is not already included in the period of actual use as a home.

If a property has been used as a home, minimum total period of exemption from CGT is 3 years. If it let for 3 years and used as home for 3 years, the exempt PPR relief can potentially double due to lettings relief. This means that if you let for 3 years and use it as home for 3 years, potentially all the gains can be exempted depending on other unknown factors.

Ramnik

[sober]

Quote Ramnik:
If a property has been used as a home, minimum total period of exemption from CGT is 3 years. If it let for 3 years and used as home for 3 years, the exempt PPR relief can potentially double due to lettings relief. This means that if you let for 3 years and use it as home for 3 years, potentially all the gains can be exempted depending on other unknown factors.
Ramnik[/QUOTE]

As a matter of interest - if the house is rented for 1st 3 years and then lived in for the next 3 - only the last three years will count towards expemption - or will it be 6 years? I would have thought, from your earlier posts, if the first three years were lived in and next three years rented out, then one could get exemption for all 6 years. Am I wrong ?

Best regards
Sober

[Tax Accountant]

Quote Ramnik:

If a property has been used as a home, minimum total period of exemption from CGT is 3 years. If it let for 3 years and used as home for 3 years, the exempt PPR relief can potentially double due to lettings relief. This means that if you let for 3 years and use it as home for 3 years, potentially all the gains can be exempted depending on other unknown factors.
Ramnik

Quote Sober:
As a matter of interest - if the house is rented for 1st 3 years and then lived in for the next 3 - only the last three years will count towards expemption - or will it be 6 years? I would have thought, from your earlier posts, if the first three years were lived in and next three years rented out, then one could get exemption for all 6 years. Am I wrong ?

Best regards
Sober


Hi Sober,

What are you trying to do? Are you trying to replace me as the expert on CGT and PPR on this forum? Just joking.

To answer your question, you will benefit from only the final 3 years which effectively overlaps with the actual period of using it as a home. The first 3 years do not qualify for PPR relief.

However, you did not read my earlier reply correctly and fully.

For your assistance, my reply stated that:

''If a property has been used as a home, minimum total period of exemption from CGT is 3 years. If it let for 3 years and used as home for 3 years, the exempt PPR relief can potentially double due to lettings relief. This means that if you let for 3 years and use it as home for 3 years, potentially all the gains can be exempted depending on other unknown factors.''

I clearly stated that the first 3 years would qualify for lettings relief. As the lettings relief can be as much as the PPR relief, all 6 years could potentially be exempted by combination of PPR relief and the lettings relief.

For your further assistance, lettings relief is the lower of:

(a) £40,000, and
(b) amount of PPR relief, and
(c) amount of gain arising due to letting

Ramnik

[sober]

Hi Ramnik

sorreee - didn't mean to offend you ;-)

I didn't mean to challange your post, but was merely seeking clarification of my understanding of the complex issue of PPR relief (only) - that if the order of occupying and letting could possibly make a differece.

Thanks for the point about the lettings relief which is in addition to PPR to mitigate the remaining CGT.

I have great respect for your knowledge and expertise on the subject :D

Regards
Sober

[Tax Accountant]

Hi Ramnik

sorreee - didn't mean to offend you ;-)

Regards
Sober

No offence taken. Anyway, I don't have monopoly on replying to tax questions on this forum.

To reiterate, the order of using as residence and letting can make a difference to PPR relief. If any of the residence period overlaps with the final 3 years PPR relief, this overlapping period cannot be counted again in the PPR relief.

Ramnik