Conversion of Main Residence into flats

[james_c123]

Hi All,

Guidance on this would be appreciated.

In 2010 I subdivided my main residence which I had lived in for 12 years into 2 flats. Both of these flats were then let out for 12 months and I am now looking to sell them both.

Assuming I sell them, would there a CGT liability? If so would it be calculated as follows?

Gain = Total sale price minus costs minus value of the property if it hadn't been subdivided.

Could the revenue claim I am carrying out a trade?

Many thanks

James

[Incredulum]

I don't think there should be any risk there is a trade (unless you are a builder... and even then the 12 years' residence I think precludes that).

If you sell them then in my view you suffer a CGT liability on any gain that has arisen from the spending of money to split the property into two. The rest of the gain is exempt as you lived there.

e.g. You bought residence in 1998 for £10,000.
In 2010 it was worth £100,000 as a single dwelling.
Then you spent £30,000 in creating two flats now worth £75,000 each.

Capital gain = proceeds 150,000
less enchencement costs(30,000)
less value when converted (100,000)