CGT Questions!
Discussion
Hi guys,
I bought a property in May 2012 which I've just accepted an offer on, which will leave a profit of about £35k before tax. I bought the house to move into but never have as I was refurbishing it (so living in rented accommodation) and my plans then changed to buy a new place with my partner elsewhere. I assume I'm going to have to pay capital gains on the profit despite it being the only property I own? I've paid council tax on it since the exemption ran out for it being empty, though I doubt that makes a difference.
Assuming I do have to pay CGT, I understand that after my allowance of £10,600 I'll pay 18% on the gains that take me up to the £34/35k tax threshold (including taking my annual income of £12k into account), and 28% on everything over that. I started a ltd company in November 2012 which has shown a loss of about £6k over the last year - I put the £8k in at the beginning (directors loan) and have only taken £2k out, with the company now unable to pay back that loan. Am I able to use this in anyway to reduce the CGT liability when I sell my house?
Cheers!
Dom
I bought a property in May 2012 which I've just accepted an offer on, which will leave a profit of about £35k before tax. I bought the house to move into but never have as I was refurbishing it (so living in rented accommodation) and my plans then changed to buy a new place with my partner elsewhere. I assume I'm going to have to pay capital gains on the profit despite it being the only property I own? I've paid council tax on it since the exemption ran out for it being empty, though I doubt that makes a difference.
Assuming I do have to pay CGT, I understand that after my allowance of £10,600 I'll pay 18% on the gains that take me up to the £34/35k tax threshold (including taking my annual income of £12k into account), and 28% on everything over that. I started a ltd company in November 2012 which has shown a loss of about £6k over the last year - I put the £8k in at the beginning (directors loan) and have only taken £2k out, with the company now unable to pay back that loan. Am I able to use this in anyway to reduce the CGT liability when I sell my house?
Cheers!
Dom
Why did you not move in?
What postal address did you use for all your normal daily activities?
What address is shown on your passport?
The reason I am asking is that, in certain circumstances, a house you have never lived in CAN be deemed to be your Main Residence for CGT. However, you have to provide evidence that it was INTENDED to be your main residence.
What postal address did you use for all your normal daily activities?
What address is shown on your passport?
The reason I am asking is that, in certain circumstances, a house you have never lived in CAN be deemed to be your Main Residence for CGT. However, you have to provide evidence that it was INTENDED to be your main residence.
Eric Mc said:
Why did you not move in? I rented a place to live in whilst I did the house I'd bought up, which I'm still living in now. During the refurbishment my girlfriend moved in with me and we prefer the place we're currently living in, plus we're looking to buy together in the near future.
What postal address did you use for all your normal daily activities? The apartment that I've been renting as above
What address is shown on your passport? The apartment that I've been renting as above
The reason I am asking is that, in certain circumstances, a house you have never lived in CAN be deemed to be your Main Residence for CGT. However, you have to provide evidence that it was INTENDED to be your main residence.
Thanks for your reply as always Eric, much appreciated. What circumstances would allow the house to be classed as my main residence for CGT and how would I prove that I'd intended for it to be my main residence?What postal address did you use for all your normal daily activities? The apartment that I've been renting as above
What address is shown on your passport? The apartment that I've been renting as above
The reason I am asking is that, in certain circumstances, a house you have never lived in CAN be deemed to be your Main Residence for CGT. However, you have to provide evidence that it was INTENDED to be your main residence.
Cheers!
Dom
Evidence that you used it as your main address for post and corresepondence.
Evidence that the loan you took out for the property was a residential mortgage and not a buy to let mortgage.
Evidence that you couldn't move in because the house needed more refurbishment than originally anticipated. Otherwise you would have moved in (force majeur).
The fact that you never rented it out and never intended to rent it out i.e. advertised it to potential tenants, never put it with a letting agent etc..
Evidence that the loan you took out for the property was a residential mortgage and not a buy to let mortgage.
Evidence that you couldn't move in because the house needed more refurbishment than originally anticipated. Otherwise you would have moved in (force majeur).
The fact that you never rented it out and never intended to rent it out i.e. advertised it to potential tenants, never put it with a letting agent etc..
Eric Mc said:
Evidence that you used it as your main address for post and corresepondence. I didn't - everything goes to my rented flat
Evidence that the loan you took out for the property was a residential mortgage and not a buy to let mortgage. No mortgage on the property, just an informal loan from my father
Evidence that you couldn't move in because the house needed more refurbishment than originally anticipated. Otherwise you would have moved in (force majeur). I knew how much work the house would require (walls out etc) and knew it wouldn't be nice to live in, hence lived in the rented flat
The fact that you never rented it out and never intended to rent it out i.e. advertised it to potential tenants, never put it with a letting agent etc. I've never looked to rent it out as I was going to move in
Assuming I do have to pay CGT, is there anything else I might be able to use to reduce my liability i.e. my lost investment in my company or the loss I made selling a car?Evidence that the loan you took out for the property was a residential mortgage and not a buy to let mortgage. No mortgage on the property, just an informal loan from my father
Evidence that you couldn't move in because the house needed more refurbishment than originally anticipated. Otherwise you would have moved in (force majeur). I knew how much work the house would require (walls out etc) and knew it wouldn't be nice to live in, hence lived in the rented flat
The fact that you never rented it out and never intended to rent it out i.e. advertised it to potential tenants, never put it with a letting agent etc. I've never looked to rent it out as I was going to move in
Cheers!
No.
However, don't forget that the capital gain on the disposal of the property is not just selling price versus buying price.
You also need to include as costs all the legal fees, stamp duties etc incurred by you as part of the buying and selling process.
You can also offset all the refurbishment costs you incurred in doing up the property (called "Enhancement Expenditure" in "CGT Speak").
However, don't forget that the capital gain on the disposal of the property is not just selling price versus buying price.
You also need to include as costs all the legal fees, stamp duties etc incurred by you as part of the buying and selling process.
You can also offset all the refurbishment costs you incurred in doing up the property (called "Enhancement Expenditure" in "CGT Speak").
Quietlybonkers said:
For six grand, i would get a mattress and move in for a few nights between now and completion ......CGT not my best subject, would that be adequate, Eric? Also, could he make a PPR election?
No - it would not be adequate. Theere are no real "tricks" one can pull. The evidence has to be there in a real sense.A PPR (Principal Private Residence) election is SOMETIMES possible provided the criteria are available to make an election.
Eric et all
The boat has sailed on this the moment contracts are exchanged as that is the sale date for CGT purposes - the completion date is irrelevant.
I would also believe that should HMRC establish you claim the exemption as a result of moving in after you have accepted an offer to sell then the relief would not be permitted and you may receive a penalty for your attempted "claim".
David
The boat has sailed on this the moment contracts are exchanged as that is the sale date for CGT purposes - the completion date is irrelevant.
I would also believe that should HMRC establish you claim the exemption as a result of moving in after you have accepted an offer to sell then the relief would not be permitted and you may receive a penalty for your attempted "claim".
David
You said it was not fit for habitation when you bought it.....so is it fit for habitation now? If it has just become ready you could reasonably move into it now. After all, this agreed sale may well fall through - I have had two such agreements fall through in the last year, and the house still isn't sold 368 days on. It's no reason not to move into the house.
But Sumo knows more bout this than I do.....
But Sumo knows more bout this than I do.....
Quietlybonkers said:
You said it was not fit for habitation when you bought it.....so is it fit for habitation now? If it has just become ready you could reasonably move into it now. After all, this agreed sale may well fall through - I have had two such agreements fall through in the last year, and the house still isn't sold 368 days on. It's no reason not to move into the house.
But Sumo knows more bout this than I do.....
I wouldn't say it wasn't fit for habitation when I bought it - it was just dated, so the whole place was refurbished (2 walls out, 2 bathrooms done, the kitchen, decorating, carpets etc). I did think about moving into it now, but if everything does go through with the sale if only have lived there for 8 weeks or so!But Sumo knows more bout this than I do.....
Dom
Its many years since I studied this but I assume the rules nowadays are much stricter? I am wondering how the tax man will ever find out about this? As the house was genuinely intended to be a principal private residence why is there any obligation to disclose the profit on a tax return? Perhaps I am missing something?
Zeemax_Mini said:
I'd always thought you'd had to live in for it to be your PPR? It all seems a bit vague on the government websites and if cant find any definite answer!
Dom
I gave the definitive answer earlier in the thread.Dom
NORMALY, the house you live in is your PPR.
A house you FORMERLY lived in but now rent out will attract some PPR CGT relief - time apportioned between the time it was your PPR and the time it wasn't.
A house you NEVER lived in and never intended to live in cannot be your PPR.
A house you INTENDED to live in but were unable to due to a force majeur CAN be deemed to be your PPR - especially if the place you did end up living in was either abroad or a rental accomodation or a residence that was part of your employment (a live-in boarding school teacher, for instance).
There are no strict time limits of living in a property to establish PPR - but actually living in the place is the most obvious PPR test and easiest one to satisfy.
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