sold only house I own - do I pay CGT?

[ASTYLES]

The whole question is a trifle more complicated than that. I borrowed money from parents and bought a house outright in 1998. I lived in the house for a short time. I then moved into my partners house, his house is mortgaged. My parents rented out my house and all rent was paid directly to them, which they paid tax on. I have now sold the property and have repaid my parents a little more than I owed them. I intend to now settle the mortgage on my partners house and have my name added to the deeds. Will I need to pay CGT and if so would I get any relief? Really hope someone can help, if not, where can I go to for help? Thank you for reading, much appreciated.

[Instinctive]

I would say that the house belongs to you as a legal owner as well as a beneficial owner. The slight sting in the tail is that your parents rented out the flat, collected all the rents and also paid all the tax on it. However, it could be that they were merely acting as nominees on your behalf. Also the slightly more amount paid to them (than the amount you borrowed from them) could be said to reimburse them for their out of pocket expenses and the tax paid by them etc.

If there is no denying that the house belonged to you in all respects, it was used as your only or main residence from commencement upto the date it was let (lets assume this was for 6 months). This period + a further 3 years is exempt. Rest of the period is chargeable. It seems that the exempt period and the chargeable periods are approximately 3.5 years each, ie half and half. Therefore, approximately half the gains will be chargeable. This will be reduced by lettings relief of upto £40,000. Any balance will be reduced by taper relief of approximately 30%. Any balance still remaining will be reduced by annual exemption of £8,500. Any remaining amount will be added to your other taxable income in the year of disposal and tax according whichever tax bands it falls into.

Ramnik

[ASTYLES]

Thank you Ramnik, that really is extremely helpful. your second paragraph is accurate and very enlightening. once again thank you.

[King_Maker]

It is crucial that the period you occupied the property qualifies it as your residence.

If it does not, then Lettings Relief cannot apply, nor is the 3 years treated as an exempt period.

How long did you occupy the house?

Have you read the Inland Revenue's Help Sheet IR283 which deals with CGT for private residences?

It is downloadable from their website.

http://www.hmrc.gov.uk/leaflets/menu.htm


Also, as Ramnik says, the rental scenario is a bit strange. How were your parents entitled to the rent, if the house belonged to you? Did you grant them a lease, and they sublet? I am not sure Ramnik's idea of agency will work, as your parents paid the tax on the rent - presumably as their income?

[CDavey9501@aol.com]

I suppose allowing the parents the free use of the property for a number of years is permissable?

[CDavey9501@aol.com]

i.e. let at £0 rent?

[ASTYLES]

Thanks for your comments and information. I have downloaded and read IR283 but it didnt seem to take into account my unique set of circumstances which is why I tried the forum. I estimate that I lived in my property for 6 months after the purchase date. I allowed my parents to rent out the property because they needed to use the rent as income as my father had been made redundant and wasnt, at that point, entitled to his pension. They paid the tax as the rent was classed as their income. It us true to say that I allowed my parents free use of the property for a number of years, although there wasnt any formal agreement drawn up to reflect this. Once again thank you for your interest and advice

[ASTYLES]

It may or may not be of use to know that I lived in, and paid rent on the property for 6 years prior to be buying it, I then continued to live it for another 6 months. All of these 6.5 years, the property was my only residence and mine was the only name on the rent ageement.

[King_Maker]

Why was the rent classed as your parents income, when your name was "the only name on the rent ageement"?