CGT on a proprty I have never lived in

[jayjaykay100]

Hi,

You guys sound pretty well informed, so if I could ask your advice. I bought a property in 2001 for £90k in the Isle of Wight and rented it out from day one. I was renting myself in London so the the Isle of Wight property was my only property; I did buy the property on the Isle of Wight with the intention of working from home and living in it myself but that never came off so had to keep renting in London and had to have tennants in the Isle of Wight property to cover the mortgage down there. In 2004 I took £20k of equity out of the Isle of Wight property to buy a home in Nottingham which I live in and have a joint mortgage with my girlfriend. The house on the Isle of Wight is now valued at £165k so I'm thinking of selling. Because it was my sole property and I intended to live in it but didn't will I attract CGT? I have read that you get 36 months to sell your first property after you have bought a second. I don't really want to be a landlord so would like to get my hands on the money tied up in the Isle of Wight house but at the same time do not want to pay CGT.... if I'm to pay CGT then I might as well keep it and retire there one day selling the house I live in now.

Thanks for any help or advice.

[MrShed]

I am far from an expert on this, so please dont take what I say as correct - wait for someone like Karongo to give you a more detailed reply. But my initial, very basic, thought would be that you would have to pay CGT, but I have no idea how much. Yes it has been your only owned property, but I wouldnt have thought that it has been your PPR(principal primary residence), as you have never lived there. However as I say I really have no clue, so await for one more knowledgable than me to post!

[jayjaykay100]

Okay thanks Mr.Shed, I have had a good friend tell me as long as it was my intention to live in the house and it was bought woth the purpose of being my residence, even if I could not live there due to circumstance that I would avoid CGT. I just wanted to double check this before I go ahead and sell the property then find myself facing a bill :(
I guess I should run it past my accountant and the IR as well but I thought I would get some free expert advice on this forum first.

Thanks for your time.

[MrShed]

I owuld be extremely surprised if that was the case jayjay....how do you prove an intention?? I do not believe that is correct at all. That said there are things such as taper relief, which i dont understand in the slightest, that karongo will explain no doubt when he finds this thread :D

[jayjaykay100]

Yes I'm hoping that I hear from karongo later on. Is there any easy way to release more equity from the property?

[Tax Accountant]

Okay thanks Mr.Shed, I have had a good friend tell me as long as it was my intention to live in the house and it was bought woth the purpose of being my residence, even if I could not live there due to circumstance that I would avoid CGT. I just wanted to double check this before I go ahead and sell the property then find myself facing a bill :(
I guess I should run it past my accountant and the IR as well but I thought I would get some free expert advice on this forum first. Yes I'm hoping that I hear from karongo later on.



The querist has tagged this same query on another thread and this has been fully answered there.

In short PPR does not apply to a property which has never been one's only or main RESIDENCE. Residence has to be distinguished from ownership.

The only exception is where one lives in a 'job related' accommodation. In this case, if you live in accommodation that is job related and you also own a dwelling-house that you intend to occupy as your only or main residence, the dwelling house you intend to occupy is treated as actually being occupied by you as a residence during the period in which you have the intention to occupy it, even if you never actually lived there. In this case it may be necessary to nominate your own property as your MAIN residence.

A job related accommodation is one which is normally provided by your employer to enable you to carry out your duties.

I don't think this exception applies to the querist.

And please, don't post queries in more than one thread if you expect free advice.

Ramnik

[jayjaykay100]

Apologies for posting in more than one place. Thanks for your advice.

Best regards
Jay

[Tax Accountant]

You are welcome. It is nice that you at least express appreciation for the free advice in these forums. It is a shame that some people don't bother at all after they have received the free advice. I suppose that is life.

Ramnik