Do I have to sell to avoid CGT?

[Gillan]

Bought flat in 1997 as second home. 1999 sold 1st property and lived in flat as PPR. Upstairs alcoholic neighbour drove me out in May 2002 and I bought cottage to live in. Let flat for holiday lets in summers 2002&2003, but because of neighbour problems no agency would let any more. Could not sell without declaring neighbour problem. Started legal proceedings against neighbour. August 2004 she finally moved out. Do have to sell my flat before May 2005 to avoid CGT or can I return to live in my flat as my PPR?
I would really appreciate help with this. Thanks.
Gillan

[James Smith]

Gillian,

CGT isnÂ’t a "all or nothing" thing. It is computed based on the various uses of the property over time. There may actually be CGT arising what ever happens due to the first 2 years when it was used as a second home, depending on what elections (if any) where made at this time. Generally speaking by selling before May 2005 you will have the period over which the holiday letting covered, although this in itself may lead to very little CGT as there are good exemptions for holiday let property.

If you would like to run through a computation so you can understand what your current liability is, and what actions you can take to (1) change this and (2) what will happen depending on your actions (eg let out, sell, keep etc) then please let me know. This is an area I specialise in.

Regards,

James Smith
Chartered Accountant
www.jamesesmith.co.uk
01284 764436

[Gillan]

Thank you James. That is very helpful.
Gillan