My 91-year old mother has shared her home with my sister, who is on long-term invalidity benefit, for the past 15 years. My sister has eaten with my mother and sat with her most evenings for the past 15 years; other members of the family stay in both the upstairs and downstairs parts of the house when they visit; my mother maintains and uses the downstairs garden. But the basement and the upstairs are separately rated, and there isn't an interior staircase between the two. My sister has been in receipt of Housing Benefit in respect of the basement, paid to my mother within the rules and limits of the Rent A Room Scheme as laid down in leaflet IR87 Letting and your home.
My sister decided last year to move to the Orkneys (where my oldest sister and her family live). To make this possible, my mother put the basement part of her house on the market as a separate property so that she could purchase a home for my sister in the Orkneys, whilst staying put herself in the upstairs part of her house. She has now accepted an offer of £122,000 for the basement, and purchased a house for my sister in the Orkneys for £60,000.
Will there be CGT liability on the sale of the basement? I have referred to the leaflet CGT/FS1 Capital Gains Tax - A Quick Guide, and all the conditions for non-liability in the section What about my home? are fully met. However nagging doubts remain that the Inland Revenue's definition of what constitutes my mother's home might be limited to the upstairs of her house.
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