Capital Gains tax question.

[rovermorris999]

I have two properties, the one in which I live and another down a track 150m away which I run as a fully-furnished holiday let. When I get older and more knackered I fancy selling my house and moving into the holiday let permanently. There'll be no planning problems with this as it was used as a dwelling before I did the holiday let. There'll be no GCT to pay as I'm selling my primary residence.
But what happens if I decide to move from the second property if say, I don't like the neighbours? Would there be any CGT liability or none, as it is now my primary residence?
Any ideas?

[uuf361]

Depends on how long you stay in there IIRC.

I think the min is 3 years but I think the taxman (if they were to investigate) would want you to be able to prove you had not moved into the property as a way of avoiding CGT.

[LC23]

http://www.pistonheads.com/gassing/topic.asp?h=0&a... - Living back in a once rented BTL house

The info in this thread will probably answer your questions.

[rovermorris999]

Thanks for that. It's vey confusing. The way I'm reading it is that I'd be liable for CGT at the reduced rate for holiday lets but with a three year exemption if I lived in it. At the time of sale it would be my only private residence so presumably the period that I lived in it as such would also be exempt. I think. Or maybe not....

[Eric Mc]

rovermorris999 said:

Thanks for that. It's vey confusing. The way I'm reading it is that I'd be liable for CGT at the reduced rate for holiday lets but with a three year exemption if I lived in it. At the time of sale it would be my only private residence so presumably the period that I lived in it as such would also be exempt. I think. Or maybe not....

Yes.

The gain on the disposal of the Holiday Let is time apportioned between the time it was a Holiday Let and the time it was your main residence.

Say you had a holiday let for 4 years and you lived in it for a further 6 before selling it, making 10 years of ownership in all. On disposable, 4/10 of the gain is theorethically taxable. However, you deduct the 3 "free" main residence years from the chargeable period leaving you with only 1/10 of the gain taxable.

As it's a holiday let (and not a normal buy to let), the gain is taxed under the Business Asset CGT rules rather than the Investment Asset CGT rules.

Be aware that the CGT rules on Holiday Lets is a bit up in the air at the moment. The last government wanted to abandon them completely and planned to treat Holiday Lets like normal Buy to Lets. The new government said that they would reverse this decision and they have. However, they have also said that they do want to revise the tax rules on Holiday Lets and they definitely want to exclude some classes of Holiday Lettings - specifically thiose that were not TRUE commercial operations.

[rovermorris999]

Thanks for that Eric. I should have no problem there, it's a commercial let, available all year round.

[Eric Mc]

rovermorris999 said:

Thanks for that Eric. I should have no problem there, it's a commercial let, available all year round.

Sounds like you should be OK - but keep your eyes and ears open for any changes to the rules that may be in the offing.