Last 18 months clarification

[tomki]

Hi All,

I have two questions to ask you and I'll appreciate if someone can help here.

1: If owner rent his private residency for 18 months, and than he returns to live in property for some time and eventually he sells the property. Would last 18 months still
counts as his deemed PPR and exempt him for CGT if property has increased in value ?

2: If owner rent his private residency for 4 years or more, and than returns to live in property refurbishes property lightly while living on it and than eventually sell the property.
Would last 18 months still counts as his deemed PPR and consider when carrying calculation for CGT bill ?


In both questions, confusion stays as owner returns to property after he rent it out for 18 months in question 1, and 4 years or more of so in question 2.



Thank you

[Peter D]

In both your examples it appears you are living in the property as your home, thus it is your PPR and the 18 months will not be deemed PPR as it already is.

Why are you renting the property out. If it is due to working away then you may be CGT exempt. You also do not appear to have considered Letting Relief which mat wipe out any CG. Regards Peter

[King_Maker]

The last 18 months of deemed PPR exemption is in respect of OWNERSHIP. Who occupies the property is not relevant. However, the same period cannot be counted twice.

If the property was at any time a PPR, and is let out then Lettings Relief is available also.

CGT is linear from acquisition to disposal- there are no valuations done at different time points to reflect PPR occupation.

[tomki]

In both your examples it appears you are living in the property as your home, thus it is your PPR and the 18 months will not be deemed PPR as it already is.

But my 1st question was " if owner rents his residential property for 18 months only, " and than returns to property for sometime and than eventually sell the property, would CGT be payable on this scenario ? Basically he is using only 18 months by letting property for only 18 months .

2nd question was " If owner rent his private residency for 4 years or more, and than returns to live in property refurbishes property lightly while living on it and than eventually sell the property. Would last 18 months still counts as his deemed PPR and consider when carrying calculation for CGT bill ?

Why are you renting the property out. If it is due to working away then you may be CGT exempt. You also do not appear to have considered Letting Relief which may wipe out any CG. Regards Peter

Property will be rented as owner will re-locate to other part of UK do to work commitments.


To simplified, in both questions, would you lose last 18 months deemed resident if you return to property ?

[tomki]

The last 18 months of deemed PPR exemption is in respect of OWNERSHIP. Who occupies the property is not relevant. However, the same period cannot be counted twice.

Are you saying that owner can rent property for 18 months or more, and than return to the property and when he sells the property can use + 18 months as deemed resident when calculating CGT ?

If the property was at any time a PPR, and is let out then Lettings Relief is available also.

Yes it was his PPR for sometime before he let it out, and it will be again his PPR when he returns home.

[bd6759]

I think you are hopelessly confused about what the 18 month rule is.

The 18 months rule treats the last 18 months of ownership as if it was your PPR if you do not live in it. For this to apply, it must have been your PPR at some time.

If you move out of a property and sell it up to 18 months later, the gain is exempt because of the PPR rules. If you sell it 19 months later, then 1 month is not exempt.

It does not matter if you move back into the property. The same rules apply. If you live in it for 17 months before you sell it, the final 18 months are treated as exempt. If you live in it for 24 months, you don't need the 18 month exemption because you have already got a 24 month exemption.

[tomki]

@ bd6759

Thank you so much for replaying to this topic. However I am still struggling understanding how 18 months apply give this scenario, so lets take two examples and see if my understanding is correct ?

Example 1:
Owner owns property for 77 months (6 years + 5 months). He lives in property as his PR from month 1 to 50, and than he rents property from month 51 to 68 (18 months), he return to property to live as his PR from month 69 to 77 and eventually he sells property in month 77.
Would he be liable for CGT based on given scenario ? Basically he has lat the property for only 18 months, but NOT LAST 18 months because he returned to property from month 68 and sold it in month 77 while living on it.

Example 2
Owner owns property for 77 months (6 years + 5 months). He lives in property as his PR from month 1 to 50, and than he rents property from month 51 to 74 (24 months), he return to property to live as his PR from month 75 to 77 and eventually he sells property in month 77.
Would he be liable for CGT on 6 months as he has let the property more than 18 months ? So calculation would be 71/77 x total gain ?


Is my understanding correct, or am I missing something here ?


thank you all

[welshtrustees]

No. You still don't understand it! There is no interaction between the 18 month rule and whether you are resident or whether you have let the property out.

Think of it this way...

Imagine you have a diary which covers all the months you have owned the property.
1. Go through the diary and mark with a red pen any month when you OWNED the property.
2. Now, mark with a green pen the last 18 months of when you OWNED the property.
3. Finally, mark with a green pen any month when you actually RESIDED in the property as your main/only residence. (If the month is already "green" then don't mark it again.)
The amount of PPR relief is now NO OF GREEN MONTHS / NO OF RED MONTHS

So in example 1, Red months = 77, Green months = 68. PPR relief is 68/77 of gain.
and in example 2, Red months = 77, Green months = 68. PPR relief is still 68/77 of gain.
In the last 18 months of OWNERSHIP it makes no difference if you are resident or letting it out.

You also need to add letting relief, costs and the your personal allowance to this. Unless it is a very big gain it is probably no CGT anyway.

[Peter D]

Read about periods of absence on the HMRC web site CG65050 from memory.

If you leave your PPR for reasons of work but return within 4 years HMRC will treat the period as if it was your PPR. Regards Peter

[tomki]

Guys thank you so much,

In simple words, If owner moves out of his PPR and property is rented, or it's empty, owner need to sell this property within 18 months from the last month he moved out, doing this way CGT is exempt .