Capital Gains Tax

[mirpur]

I bought a property in 1999, stayed in it for a year with my parents then bought a second property on my name to be near to work. My parents still stayed in my old property. I sold the second property in 2005, then moved back to my old property for 3 months. I have now bought another house for my mother/father, and now selling my first property.

The maximum time i have stayed in my first property is approx 1 year and 3 months, is there any CGT due on me. Thank You for your kind help.

[Peter D]

Lots more information required. Who name/names ere the properties in What increases in value did your original property attract in the time you were not there and what was it worth 3 years after you left it. Regards Peter

[mirpur]

Hi Peter D, first of all many thanks for replying. The property is in my name, in 1999 the property was probably at a value of 70k, but now today we had it valued at approx 130k.

Although i had moved out of the property after a year staying in it, the reason for moving out was work related (to be closer to work), it was never rented out and only used as my parents main residence and myself when i was off work.

Regards

[Instinctive]

I fail to see the relevance of Peter's query regarding the gain during the 3 years absence and the gain thereafter. Surely the gain is always time-apportioned evenly throughout the whole period of ownership.

You bought the 2nd property in 2000 and sold it in 2005. I am assuming that you have not declared any Capital Gains Tax on this property because you considered that all gains is fully exempted due to using it as your home throughout your ownership.

As only one property can benefit from 'only or main residence' exemption at any one time, you cannot claim the PPR exemption for your 1st property for the same period. Therefore, periods of qualifying absences do not apply in your case.

There are issues relating to making a nomination where you had more than one residence but this does not apply in your case as any such nomination had to be made within 2 years of having the use of two residences.

Therefore, your 1st house will qualify as your main home for 1 year at the beginning plus the final 3 years automatic exemption (inclusive of the 3 months at the end), making 4 years exempt out of a total period of ownership of say 7 years.

Chargeable gains is 3/7ths x total gains £60,000 = approx £25,000. Taper relief is 5% after 3 complete years plus 5% for every complete year thereafter. This will be approx 20% x £25,000 = £5,000, leaving £20,000. Deduct annual exemption of £8,800, leaving approx £11,000 taxable as top slice of all other taxable income and gains in the same tax year.

I hope this helps.

Ramnik

[Peter D]

Hi Ramkin, I asked about the 3 years value in case the potential gain had already taken place and since then the gain may have been small. I take your point of time-apportioned evenly but I have seen cases where the owner has been able to prove the value of the property against time and offset a little more of the value into the exempt period. Regards Peter

[Instinctive]

Hi Peter,

I note what you say, but I don't believe there is any basis of apportioning gain other than on a time-apportionment basis, even if it can be proved that more gain has occurred in the exempt period.

Ramnik

[Peter D]

I agree it does not sound like it in this case it's straight forward. Regards Peter

[mirpur]

Ramnik/Peter thanks for your kind replys

I did not pay any CGT on my second home when i sold it, because it was my main residence, although can i argue that the only reason why i moved from my first property is because it was work related.

I still used my first home on my days off, to go and stay with my parents. Any suggestions if i can get away with paying CGT.

Regards