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Where Taxpayers and Advisers Meet

CGT, PPR and whether to report?

LynneB
Posts:10
Joined:Mon Jul 25, 2016 4:50 pm
CGT, PPR and whether to report?

Postby LynneB » Tue Jul 26, 2016 4:01 pm

Hello. I bought a house last year but didn't like it and a few months later found one I preferred, which I went ahead and bought without selling the first. Property2 needed renovation so I lived between the two, intending to move fully into property2 once renovated and then sell property1. However, an unsolicited buyer asked to buy property2 for a lot more than I paid, so I sold it after owning it only 9 months. I have made a profit much higher than the annual CGT allowance.
I've consulted two accountants and have been given conflicting advice so am more confused than before. One has said that after such a short ownership I'll have to pay CGT. The other has said that after even very short occupancy, under PPR rules as it was my home I don't have to pay. Other advice is that I shouldn't mention it on my tax return as this will have the effect of flagging me up to HMRC for investigation.
I want to do the right thing, but I don't want to draw attention to myself as I have moved several times in recent years, each time making a profit.
I'd also like to sell Property1 as soon as possible but its value has risen too and I'm worried I could be liable for charges there as well unless I live there for several years.
Can anyone advise which accountant is correct? Am I liable for CGT? Should I report the sale? Is it safe to sell house1 that I don't like?
Thank you to anyone who can offer advice.

pawncob
Posts:4676
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT, PPR and whether to report?

Postby pawncob » Wed Jul 27, 2016 5:08 pm

Did you elect either property as your PPR?
If not, property 1 is your PPR and CGT is due on sale of 2.

It may not be too late to elect.
With a pinch of salt take what I say, but don't exceed your RDA

LynneB
Posts:10
Joined:Mon Jul 25, 2016 4:50 pm

Re: CGT, PPR and whether to report?

Postby LynneB » Thu Jul 28, 2016 9:32 am

Thank you very much for replying.
No, I've never elected any property as a PPR before.
Both properties were bought within the past year. Can I simply choose Property2 as my PPR for this tax year and then Property1 for next year? Is that how it works?
Having recently sold Property2 after only 9 months ownership, will HMRC need to be told?

pawncob
Posts:4676
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT, PPR and whether to report?

Postby pawncob » Thu Jul 28, 2016 10:38 am

Read all of this.
https://www.gov.uk/hmrc-internal-manual ... al/cg64520

You have two years from acquisition to make an election, so you can nominate 2 as your PPR as long as you can prove that it was your PPR. (occupied)
With a pinch of salt take what I say, but don't exceed your RDA

LynneB
Posts:10
Joined:Mon Jul 25, 2016 4:50 pm

Re: CGT, PPR and whether to report?

Postby LynneB » Fri Jul 29, 2016 2:13 pm

Thanks so much pawncob for directing me to such useful information.
Still not sure whether or not to report on my next tax return? It's not so much paying CGT, as I'm happy to do that if I owe it, more hearing that whether I owe or not,informing them will have the effect of flagging me up for investigation.

pawncob
Posts:4676
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT, PPR and whether to report?

Postby pawncob » Fri Jul 29, 2016 2:45 pm

If it all happened last year, it'll go on your 2016 return. Even if you've already submitted, you can amend it with no consequences.
With a pinch of salt take what I say, but don't exceed your RDA

SteLacca
Posts:448
Joined:Fri Aug 07, 2015 2:17 pm

Re: CGT, PPR and whether to report?

Postby SteLacca » Fri Jul 29, 2016 3:48 pm

For the record, length of occupation is irrelevant to whether or not PPR will be available. The test is quality of occupation and the degree of permanence. Degree of permanence is based on expectation when taking up occupation. (Goodwin v Curtis (1998) 70 TC 478)

LynneB
Posts:10
Joined:Mon Jul 25, 2016 4:50 pm

Re: CGT, PPR and whether to report?

Postby LynneB » Fri Jul 29, 2016 6:20 pm

Thank you both. I'm very grateful for you taking the trouble to help.
From the advice kindly given, and the links to information that I've now read, it seems a grey and complicated area. My biggest worry is getting into trouble. I am quite happy to let HMRC decide whether or not CGT is due, but am afraid to contact them after advice from one accountant that bringing myself to their attention will make me an easy target for investigation which could be unpleasant, expensive and involve going back years (I have made a profit on several house sales in the past).
Does anyone know if this is true?
What would happen if I don't declare and HMRC later decides I should have paid?

pawncob
Posts:4676
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: CGT, PPR and whether to report?

Postby pawncob » Mon Aug 01, 2016 10:14 am

The biggest worry is that you've got a bit of "previous". If you've been buying and selling houses HMRC might consider that you've been trading, in which case all previous and future profits could be subject to income tax.
A full and complete disclosure is the only way to rid yourself of the threat of prosecution. Concealing it only compounds the crime and increases the risk of more punitive fines.
With a pinch of salt take what I say, but don't exceed your RDA

LynneB
Posts:10
Joined:Mon Jul 25, 2016 4:50 pm

Re: CGT, PPR and whether to report?

Postby LynneB » Mon Aug 01, 2016 5:38 pm

Thank you pawncob. That makes sense. I certainly don't want to commit any crime.
Your advice has been great -thank you very much for your help


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