CGT on property used as main home then let for 15 years

[mullet]

b4cvm - you seem very reluctant to pay any CGT. Because the property was let for so many years and therefore not your only or main residence, and has risen to the current market value, some CGT liability is inevitable. Comparison with MPs isn't really valid. If you genuinely had more than one residence, then you could have made an election, but if you had only one then an election would have been irrelevant. If an MP owned two properties for (say) 10 years, they could have PRR on only one at a time (but plus the final three years). And since they tend to live in both, lettings relief would be unavailable. (That sounds like I'm sympathetic to MPs. I'm not). So MPs did not in every case escape CGT altogether.

But I think you are forgetting an important point. You face CGT liability because the property has risen in value. So you will have more cash in your pocket, albeit with some (not much in relative terms) going to HMRC. If the figures and dates worked in such a way that the gain was fully covered by PRR and lettings relief, then whilst you might be happy with not paying CGT you would have far less money in your pocket. I haven't run any figures, but I think you'd be surprised at how much lower the disposal value would have to be to reach chargeable gains equal to the annual exemption(s) available. And that difference in value would be the amount of real money you would have lost.

[Peter D]

To answer your question. The gain on the property say at 14/9/1020 is £750K - £100K so £650,000 you have CGT PPR apportionment of 194/341 so a resulting gain of £280,208. From this we deduct the Letting Relief ( 2*£40K ) so £200,205 now we 1/2 it and deduct the individuals unused CG Allowance presently £10,100 then tax the gain at the individuals marginal rate. Thus the figures I gave you £24,530 and £23,083
Now lets say you moved back in for 5 years and you spent £100,000 on capital expenditure/enhancements, like a new extension, a second floor, a conservatory and a detached double garage. Then you sell it for £1,000,000. So you have a gain of £900,000 - £100,000 enhancement so £800,000 and a apportionment of 218/401 so the gain is £365,087 - £80,000 LR then halved and your unused CGA deducted and then taxed at your individual marginal rates so around £36,643 and £35,197.
As you can see your gain has gone up considerably but the CGT has only risen by around £24,227 for a gain of £150,000 ( 250k - 100k(enhancement)).
I hope those number help you to understand your situation and allow you to move forward. Also please be aware that any disposal of your gardem for building will not be free of CGT by the same apportioning rules. Read http://www.hmrc.gov.uk/manuals/cg4manual/CG64208.htm
For clarification.
Regards Peter

[mullet]

Peter - thanks for producing some figures to support my ramblings regarding the relationship between consideration received and CGT arising.

[b4cvm]

Peter,
Thank you so much. Your information has been invaluble. I had known that CGT would be due, but mistakenly thought it would be from the value at the start of letting some £300k plus allowance from PPR. You have been very patient in your replies. kind regards from Peter

[Incredulum]

You can flip - and have flipped - your properties.

You have been renting out a property for 15(?) years, it is not reasonable to suggest that you shouldn't be paying tax on the very considerable profits that have arisen during this period.

If one joint owner dies, does the other have to pay all the CGT on any sale or just the half they owed as it were.?

A bit complicated and slightly perverse. The gain on the inherited half up to the value at the date of death becomes tax free. However, any subsequent gain on that half is partially taxable - based on the 13 years of non-occupation.

[b4cvm]

Hey Incredulum,
I have not flipped the properties yet! I have been honest and above board. I am selling one house and going home to my first home brought in 1970.
I certainly do consider it reasonable to pay CGT on profit during rental period, of course, but felt it should be on profit since the rental started.When the property was worth 300k. You may not understand that the Tax office were currently giving me figures of 500k and plus as due for taxation.That was why I came to this forum, where people have been most helpful.Yourself included of course. Thank you

[Peter D]

Are you talking to an HMRC CGT specialists department or an HMRC call centre. If it is the later then I suggest, again, you stop talking to them as they are just confusing you and do not have a grasp of your circumstances. Regards Peter

[b4cvm]

Incredulum,

I forgot to mention, that I found it hard to come to terms with the fact that when I return to my home, after rental period( owning no other property),therefore my PPR, the GCT continues to rack up on any gain after I return. After the return to PPR status there is no way of establishing the value on that return and then reverting to the no CGT status of ones only home. it just goes on for years becoming a tax liability.Instead of a sum of money owed for the term of rental.

[b4cvm]

Peter, Yes I was speaking to the specialist department, thats why I was so horrified. I dont intend to speak to them again.

[Peter D]

You owned another property which was your home and it was your PPR so there will be no CGT on it's disposal and you can not have two PPRs at the same time. Regards Peter