Need some help understanding CGT guidelines

[berneslai]

Hi all,

I wonder if you can help with some (rudimentary) CGT questions. I have attempted to search the forum but haven't found exactly what I need.

I currently own a property in Yorkshire but work commitments have meant that I have had to work in the South East for the last three years. The owned property is in quite a stagnant area of house movement - I have managed to rent the property out once for 5 months (end 2013) but otherwise it has been entirely unoccupied. The house has been up for sale since January of this year with just one viewing to date.

Having got bored of paying landlords for sub-standard property rentals in the South East, I have decided to purchase my own property in the area in which I work. I intended to fund the purchase with the sale of my own property but two previous purchases have fallen through in this manner as there is little/no interest in my Yorkshire home. As of next February, I should have enough money to raise a deposit from my own funds irrespective of interest in my owned home.

I therefore have two questions:

(1) Having not lived in my property in Yorkshire for 3 years, but being the only property I owned, was there any need to declare this as my "Primary " residence or is that only relevant when it comes to the ownership of two homes? I have not been on the Electoral Roll there for this period and I'm not sure what proof is needed, if any, that this currently is my PPR.

(2) Given that I am not at all confident that my house will sell in the CGT 'window', is there anything I can do to extend the period or minimise the losses to CGT?

Thanks,
B.

[jpcentral]

You don't say how long you owned and lived in the property prior to your moving away from Yorkshire or what you paid for the property or the likely selling price.

It is quite probable that there will not be any CGT liability - depending on your answers to those questions.

[berneslai]

It was purchased in 2003 for £135k and is currently on the market for £190k (though in truth, I suspect the final price will be c.£160k-£170k).

I lived there between 2003-2005 and 2008-2011 and it has been unoccupied for periods outside these years other than late last year (when it was rented out for the first time).

[welshtrustees]

PPR is related to residency not ownership - what matters is what period of time was a property your main residence either by fact or by election and how that overlaps with the period you owned it. You can only make an election when you have two residences and the combination of residences changes or is initially created (or you vary it).

The periods 2003-2005 and 2008-2011 would appear on face value to be eligible for PPR as the house in Yorkshire was your main residence as a matter of fact and you owned it.

You don't say what happened in 2005. But in 2011 you moved to London and rented a flat under a tenancy (I assume). This also counts as a residence and by the description in your post it was your main residence. At that point, if you were still resident in Yorkshire, you had the right to make an election between London and Yorkshire. Normally you would have 2 years to make the election. In this case, because the second residence is a tenancy, you can make it any reasonable time after you became aware that you were entitled to an election i.e now. But only if at the time you were genuinely still resident in Yorkshire as well.

Residency is a matter of quality of occupation not quantity. Quality means for example you had possessions there, paid the bills to heat it and other utilities - living there on occasion rather than camping or a hotel room type occupancy. From your description it does not sound like you genuinely were resident in those intervening periods - and clearly not when you were letting it.

So I doubt you have the ability to make an election and if you did it is unlikely for a very long period of time.

In summary you should be entitled to PPR for the period 2003-2005 and 2008-2011 when it was your main residence de facto plus 18 months prior to point you exchange on a sale.

Given the numbers you mention, a bit more than half of the total PPR will be available and with the CGT exemption plus potentially some letting relief will reduce your CGT to a low number.