CGT on property

[fraz]

i purchased a property in London in april 1998 and let it out, whilst living with my parents.
After getting married in jan 2000, i moved in with my partner in rented accomodation.
in june 2002 i purchased another property which i and my partner moved into.
in dec 2002 i moved into the london property due to family commitments in london.
i now want to sell the london property - the capital gain is approx 50k. do i have to pay CGT

[Nigel Lord]

Fraz

From the information you have provided it does not appear likely that you will be entitled to any Principal Private Residence (PPR) Releif as the property has at no time been your main residence.

If you could establish that the property was your main residence when it was first acquired; or, if you were to live there for a short period prior to sale (and then make a PPR election to the effect that it was your main residence), the potential chargeable gain could be considerably decreased.

My recommendations are as follows:

1. You ascertain what is your actual exposure to CGT. You will be entitled to the following deductions and reliefs:

a) The costs of acquisition (stamp duty, search fees, legals etc.)
b) Sale costs (legals, agents fees etc.)
c) The original cost of the land.
d) Taper relief from 6 April 1998 to the date of sale (probably 20%).
e) Any unused annual exemptions (as you are married, it should be possible to utilise your spouse's annual exemption with some basic planning).
f) Any unused capital losses brought forward. g) Any capital losses arising in the same tax year.
h) Any trading losses arising in the same or succeeding tax year.

2. If there is still any exposure you should consider transferring part of the beneficial ownership of the property to your spouse to utilise any unused annual exemptions and lower/basic rate bands. This may be achieved by a simple deed of gift which is inexpensive. (Advice should be sought, however.)

3. If there is still any exposure you should ascertain whether you could establish that the property has ever been or could become your main residence, thus qualifying for PPR Relief. PPR Relief is available for the period of (main)residence; a period of permitted absence of up to three years in certain circumstances, and the last 36 months of ownership if you have resided in the property at any time. Advice should be sought on how to achieve this.

Our firm specialises in this area of taxation. If you would like further advice, please do not hesitate to contact us.

Nigel Lord
Lord Associates
Caxton House
Old Station Road
Loughton
Essex IG10 4PE
Tel: 020 8418 9101
Mob: 07769 931 852
Fax: 020 8418 9101
info@lordassociates.co.uk