Gain on main residence

[Gomo1974]

Hi,

I bought my 3 bed house in January 20 for £520k which required complete refurbishment.

Shortly after purchasing I and my parents decided they would move in, so i decided to build into the loft and have a single story rear extension.

The works are now complete, but during the lockdown my parents decided they dont want to move in as they want to be close to their GP, high street etc.

The additional extensions and considerable work I did myself have increased the value estate agents have Said. The house is now worth £700k so I would have made a gain of £100k.

As I have only lived in the property for 8 months is that going to be a problem when I attempt to sell and would I have to pay CGT ?

Also I bought with a mortgage.

Thanks

Mo

[jerome.lane]

If you intended to live in this property, then you should get full principal private residence relief on a sale provided you meet all the conditions. HMRC may challenge the quality of occupation, your intentions and the short occupancy so you could always seek a pre transaction clearance (sometimes a bit like shooting yourself in the foot) . You should definitely make sure you evidence a non profit motive and an intention to live in the property as your main home. The more time that passes, the less risk there is.

[Gomo1974]

Hi Jerome,

Thanks for your reply.

It was always my intention to live in the house with my daughter. The house is now larger than we need.

What is the minimum period of time We should spend in the house before putting it up for sale?

How will HMRC be alerted if I were to sell in the next couple of months?

Thanks

[jerome.lane]

There’s no hard and fast rules. Life gets in the way and you won’t be the only one downsizing in the likely economic fall out from the pandemic. You need to be able to substantiate your assertions made in these posts as far as possible. Your family and friends, solicitors, estate agents, builders etc should be able to support if needed. If you haven’t been down the pub bragging how you’re going to make a quick buck on a refurb, you should be safe from CGT relief denial or income tax treatment on any gain you make. If you had genuine intentions and some quality of occupation, the relief should apply and hopefully, you won’t get HMRC attention. Good luck!

[bd6759]

I disagree.

You bought the house for yourself, not your parents. That they don’t want to live there does not change that, so there is no need to sell other than realise a gain.

Where did you live 8 months ago, and during the renovations?

I think HMRC will rightly question this.

[jerome.lane]

My reading is that he lived in the property for the 8 months during renovation - bought in Jan and Aug now so makes sense. If he now decides he doesn’t want to live there, that’s his call and although it might get questioned, what has he done for PPR relief to not apply?

[bd6759]

You are reading things that aren’t in his post. A man and a young child living in a house during a complete refurbishment during a lockdown?

He bought a house to live in. His parents are an irrelevance because he didn’t buy it for them, so them deciding not to move in does not change anything.

He wants to sell it after refurbishing it. Saying he doesn’t like it doesn’t ring true because he has completely refurbished it: presumably to a standard that he liked.

The only information we have is that he has bought, modified and sold an asset. That could be a trading transaction. PPR might not be an issue. Even if it is, money spent to realise a gain does not qualify even if he can show that it is a residence.

[Gomo1974]

Thanks for all your replies.

I think it’s best to wait till the next when I have lived in the house for 12 months and then put it on the market.

In the past 10 years I have lived for 5 years in each.