CGT on a property

[oscardoggydog30@hotm]

I'm rather confused about cgt - i've done a bit of research but cannot find as yet similar scenarios to mine so wonder if you might let me know the probability of my having to pay cgt and how much it might be. I bought a property in 1999, as i had to work away from my partners home (in his name). I flitted between my property and his over the first eighteen months of my ownership of my property, and then my work changed again so i didnt need to use it very much. I decided to let it through an agent from late 2000. I made no profits, just covered costs. Since I was re-locating again - and I had a tenant in place, I decided to take advantage of my property's value which had increased to remortgage it rather than sell, for the deposit on another property. In 2002 I bought another property (my main residence). About a month after this my first tenant gave notice, and i had to find another tenant. I re-let the property for six months - the tenants were terrible and trashed the place - and as i had had an offer for the property I decided I would sell it.
The initial cost of the property was 60,000,1999
I remortgaged it for 85,000, 2002 releasing some equity.
A year later I sold it for 125,000.
A profit from when I remortgaged of 33,000.

I started to worry that I would have to pay capital gains on the whole amount from when I bought the property to when I sold it. Is this the case?? If I had sold it then just bought another property it would have been better, but i seem to have made a mess of the whole thing. As I say I'm a little confused over the whole thing now. I would appreciate any feedback or advice. thanks.

[Nigel Lord]

You state that you were resident in the property from some time in 1999 (when?) until some time in 2000 (when?) the total period of residence being 18 months.

If it is possible to establish that during this period the proeprty you bought was you main residence, you would be entitled to Principal Private Residence (PPR)Relief for the period that you resided there and the last 36 months of ownership ending in 2003 (when?).

The mortgages are a red herring, they have no effect on the CGT position.

As a rough guide, assuming that you do qualify for PPR, you are unlikely to have a chargeable gain.

If you would like definitive advice, please state the dates of purchase and sale and you residence in the property.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

[oscardoggydog30@hotm]

Thanks for your quick reply. In answer to your question. I purchased the property in Nov 1999, and let it from May 2001 until May 2003 - with a 6 week gap between tenants. I paid council tax whilst I was using the property, and bills - although I was listed on the electoral role in the area of my partners property also. I'm not sure of how one would prove that this was partly my main property because of work since i'm on both electoral roles. In the worst case scenario - say that i could not prove that the property i sold was my main residence - is it possible that i'm liable for a whopping great tax bill??

[Nigel Lord]

You appear to qualify for PPR relief as the property was your main residence until May 2001. As you sold it within 36 months, you also qualify for PPR reilef for the let period.

If this is correct, no chargeable gain arises.

My point obout you being able to demonstrate that the property was your main residence is in case of an Inland Revenue challenge. Under tax law your effectively have to prove your non-chargeability rather than the Revenue having to prove that you are chargeable.

Lord Associates
mail@lordassociates.co.uk

[Ian McTernan CTA]

I assume you declared the rental income on your Tax Return? If not , then you will also need to calculate and submit rental statements for the period of rental (preferably before the Revenue ask for them). Bear in mind that repayment vehicles of any kind and capital repayment element does not count against rental income, and only the interest on the original loan amount will qualify to set against the rental income.

I would be glad to assist with the voluntary declaration.

Ian McTernan CTA
McTernan Associates
Chartered Tax Advisers
ian@imcternan.com