Neil Barlow

Registered with Property118.com
Tuesday 10th September 2013


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Neil Barlow

18:05 PM, 28th August 2012
About 7 years ago

Exit plan - move in before selling up to avoid CGT

Hi Mark,

Bronya is on holiday this week so I thought I would respond in her absence.

The basic Capital Gains Tax treatment on the disposal of a main residence is that any gain is
subject to Principal Private Residence Relief and therefore exempt from CGT providing the property has been the only or main residence throughout the entire period of ownership. This is subject to various provisions to cover situations such as periods of absence, owning two or more residences and garden or grounds which exceed half a hectare (approximately 1 acre).

Providing a property has qualified as the only or main residence at some time during the ownership period, then the last three years of ownership always count as a period of
residence.

In addition a Residential Letting Relief is available in respect of a property which has been
let but which has also been the only or main residence at some time during the ownership period. This relief is the lower of £40,000 and an amount equal to Principal Private Residence Relief due.

These reliefs are time apportioned over the entire ownership period. For example, say a
jointly owned property had been owned for 10 years and is sold making a gain of £100,000. The property had also been the only or main residence of the joint owners for the last 12 months of ownership. The capital gains tax computation would comprise the following:

Gain £100,000

Private Residence Relief (3 years out of 10) -£30,000

Residential Letting Relief (lower of £40,000 and Private Principal Residence Relief) -£30,000

Capital Gain after reliefs £40,000

Less 2 capital gains annual exemptions provided not already used -£21,200

Chargeable capital gain £18,800 (taxable at either 18% or 28%)

To qualify for Principal Private Residence Relief the property must be occupied as the only or
main residence and it may be necessary to prove this to H M Revenue and Customs. HMRC do not give any guidance but ensuring you are on the electoral role, registering for council tax and registering with the local doctors surgery will all help your case.

If two or more properties are available to use as the main residence, an HMRC election may be
necessary and there are strict time limits in which this must be done.

I hope this helps.

With kind regards,

Neil Barlow FCCA ATT... Read More