Tax on two self-build properties

Bernard · Postby **Bernard** » Sat Mar 01, 2003 2:16 pm

My Wife(66) and I(69) have two jointly owned properties. 'Property1'(375k), a self-build project, has been our only residence for 34 years. 'Property2'(450k) was also constructed on a self-build basis in our garden and is approaching completion with the intention of selling 'Property1' and moving into 'Property2'.

'Property1' has been on the market for about six months and has not yet sold.

We intend to stay in 'Property2' for least the necessary period to avoid CGT which we believe is twelve months (Please Advise).

Would we be right in thinking that it is possible to move into 'Property2' for a time whilst still maintaining ownership of 'Property1', then moving back into 'Property1' as our main residence in order to sell 'Property2' with no tax implications?

Many Thanks in advance.

Huw Williams · Postby **Huw Williams** » Mon Mar 03, 2003 1:47 am

I was not quote sure of your intentions as your question contains these two possible ways forward -
a) move into property 2 and sell property 1 or
b) simply sell property 2 and try and get some CGT relief.

Option a) is straightforward - if you have lived there as long as you say, the gain should be exempt as your principal private residence.

Option b) does not work. The capital gains exemption for your principal private residence contains anti-avoidance rules to stop giving the relief where the main aim is to make a profit out of a property.

However you only mention option b) after saying you have been trying to sell property 1 unsuccessfully. In these circumstances if you move into property 2 and still cannot sell property 1, relief may be available if you then sell property 2 and move back into property 1.

It all depends on your intentions.

Huw Williams
enquiries@huwwilliams.co.uk

paultaylor@vatease.c · Postby **paultaylor@vatease.c** » Tue Mar 04, 2003 2:41 am

Aside from the CGT issues, there may be VAT implications to the actions you are considering.

If HM C&E were to take the view that you are constructing and selling Property 2 as a business activity it may prejudice any VAT claim you might have made under the DIY Builders refund scheme. However, you may be entitled to register for VAT and reclaim the VAT on purchases.

Paul Taylor
paultaylor@vatease.co.uk
http://www.vatease.co.uk