Capital Gains Tax and change of circumstances

[WinkyWinkola]

I'm just not clear on our position wrt capital gains tax.

We have built a 3 bed house next door to our current house which is our main residence.

We intended to sell our current house (also 3 bed) and move into the new house.

I am now 8 weeks pg with dc4. Both houses will be too small and we need to move to a bigger house altogether.

So we don't know what the law is regarding cgt and change of circumstances like this. If we sold current house and then new oneafters without moving in, would we have to pay full cgt?

I need to do some financial planning to work out how much we can spend on a new bigger house.

Any tax experts out there help?

HMRC will just deal with the facts. You will therefore be liable for the tax due if you do not use the primary residence exemptions/nomination of PR to mitigate tax in this situation.

If you haven't got an accountant, are you sure you have maximised your claim for self-build VAT?

Is the new house built on a separate plot of land, or is/was it once within the curtilage of the existing house?

Have you built/converted/renovated any other properties or do you own any rental properties?

Is there any reason not to move in to the new build - this would avoid many of the potential CGT pitfalls?

HMRC will just deal with the facts.

Not true - in PPR cases the intentions of the taxpayer at various points in time can be critical.

It depends how quickly you move too . If you wait a year or 2 it would be less suspicious than of you live in the new house for 2 months then sell (IYSWIM?)

Hi. Thank you for your replies.

The new house is built on the drive of the current house. We had to split the land.

We own no other properties and have never done this before.

We were fully intending to live in new house until I got pg and it will just be too small is all. I wanted to save us one extra move is all and I wondered what our position is wrt cgt.

Mr Anchovy, are you suggesting that HMRC would alter their position on CGT if the OP didn't move into the house? I agree intentions are critical, but I can't see that a concession is likely, don't intentions for PPR extra statutory concessions mainly concern employment and surround 'periods of absence that might otherwise not be ignored'??? Periods usually being preceded and followed by periods of occupation.

Okay so we have to move in. How long is usual for it to be considered our sole primary residence? The current house will be for sale in one month.

You need to move in to the new house with the intention of making it your home. There will then be full relief from CGT on its sale if you change your mind.

are you suggesting that HMRC would alter their position on CGT if the OP didn't move into the house

No, I'm saying that if the OP moves into the new house with the sole or principal purpose of avoiding tax on its subsequent sale HMRC may well deny relief.

How long is usual for it to be considered our sole primary residence?

Intention is more important than time. Given your pregnancy I think that it is reasonable to assume that your intentions may change from month to month: it would not be surprising if after having lived in the new house for a short time while pregnant you decide that it is not going to be big enough for your new family.

If any of what I say seems useful GET IT CHECKED I am not a professional!!

If you are putting the current house up for sale in a month and the second house is now habitable because you originally intended to move into it when you sold are you currently paying council tax on both properties?

What I'm getting at is that if you are claiming one house as a second home why not do a partial move to make your current home as clean tidy and marketable as possible even if you still use it for lots of purposes and effectively enjoy 6 bedrooms for a while!

You could then transfer your primary residence for CGT purposes to the new house and as HMRC allow two years to notify this you could back date the transfer as far as is reasonable ie the date the new house became at all habitable.

Say you backdate a year. The old house has then been your second home for a year. If it takes 6 months to sell it it will have been your main residence for all but the last 18 months of your ownership which will not change the CGT position because the last three years of ownership are in effect disregarded (I believe this is because of the time it can take to sell).

Meanwhile you are establishing residence in the new house so when you come to sell it, maybe at a similar time to the old one, you will have over a year's time on record with it as your primary residence.

It's a rather odd system. If you make an election of one of the houses as your main residence HMRC will accept that as the fact.

Another thing to consider might be letting out the new house for a while when you have sold the old one. I can't tell you exactly how lettings relief works but again there is an exemption which I believe was invented to take account of the idea that you might need to let out your home for a while prior to selling.

The HMRC site is very informative and might make it easier to ask a solicitor/accountant the right questions.

If you make an election of one of the houses as your main residence HMRC will accept that as the fact.
That is not correct. If there is more than one house which is your residence and you make a valid election of one of those houses as your main residence then HMRC will (in the absence of deception or other unlawful act) accept that as fact, however first you need to establish that the new house can be treated as one of your residences. In order to do that, you need to live in it (unless it qualifies as a deemed residence under a number of specific provisions which do not apply here).

I don't agree that the HMRC information on the pages you linked to is very helpful in specific cases: it explains the general principals fairly well but does not indicate where exceptions may apply or provide links to further information regarding exceptions.

A more comprehensive view of HMRC's position can be found in their own manuals.

... and another part of the manuals which is not easy to find.

Thank you very much. Will be having a read...