CGT / PPR / Lettings Relief - question

[sredna]

Hi

I bought a house in 2001 (house 1) which my wife and I lived in until last June when we bought a second house (house 2). House 2 required extensive work / modernisation. About half of this work is now done, but we will have to move out in January for six months while the work is finished - no services, etc. House 2 will become our permanent home thereafter.

Would it be advantageous from a CGT perspective to return to house 1 (currently vacant) for this six month period, after which I plan to let it for a number of years? Also, would I be entitled to lettings relief on house 1 if I let it out after this? Finally, would it be beneficial for me to add my wife to the deeds of house 1 to double up our lettings relief to potentially £80k - house is currently only in my name?

All very confusing

Sredna

[Lee Young]

Whether or not you move back in you (and you alone) are entitled to lettings relief.

If you transfer half the property to your wife, then both move back in, then you will both be entitled to lettings relief thereafter, so yes this plan has tax advantages.

[sredna]

Thanks Lee

When we move back into house 1 in January do I need to make some sort of PPR declaration or is my residence there assumed, provided I can prove that I live there (bills, bank statements, etc)? If so, when does the 36 month PPR extension kick in - is it once we move back to house 2 permanently and rent out house 1, ie, probably July 2009?

Also, do I have to add my wife to the deeds before we move back to house 1 in January?

Appreciate the advice

Sredna

[Lee Young]

You should add your wife's names to the deeds before you move in.

Technically you can not elect that the house is your main residence - you can only elect a min residence when you have two or more residences available to you and as the other property is uninhabitable this is not available to you as a residence. Your main residence claim for this period will be based therefore on fact so it will be useful to retain evidence of your occupation.

The 36 months is simply an extension when you sell the property. At that point you work out what proportion of your ownership was covered by actual or deemed occuaption and then add the 36 months to this time period.

[sredna]

Lee

Thanks. Let's say we did not return to House 1 (we may try to let it soon to save some money for the build) and either roughed it in House 2 or moved in with family during the project, what should I do re putting my wife on the deeds? Do I have any options to minimise the gain at disposal? For info, I bought the house in 2001 and will probably sell it in 2016. Wife moved in when we married late in 2006, selling what was her PPR just before we moved into House 2 last year.

Sredna

[Lee Young]

In those circumstances putting your wife on the deeds will at least give you her annual exemption also on eventual sale.

[sredna]

Lee

Thanks. How do I go about giving my wife the (say) 5% needed to use up her c £10k Ann Exemption if we sell this property? Do I do this via the deeds or do I do it as Tenants in Common? And must I contact my mortgage provider to do this?

Sredna

[Lee Young]

As there is a mortgage to put your wife's names on the deeds you will need the mortgage provider's permission.

An alternative to that is that you execute a declaratin of trust stating that although you will be repsonsible for the mortgage still yourself, the equity in the property is held by you in proportions betwen you and your wife - if not equal then this will be as tenants in common.

[sredna]

Thanks for the advice Lee

Sredna