Capital Gains tax - advice please!

[goldenbird]

We bought our 1 bedroom flat from my BIL a few years ago at a lower than market price, as part of this arrangement my husband waived a part share in his inheritance.

When we had our first child we moved out as we didn't have enough space, so we are currently renting and also renting out our flat. We are now looking to sell it. I understand that we need to pay capital gains on the difference in sale price now, but I thought that was waived if the flat is our prime residence. But now I've heard that it doesn't count as prime residence (even tho it's the only property we own) as we live elsewhere. Is that correct? And if so, how long would one or all of need to live back in the old flat for, in order for it to count as our prime residence? Advice gratefully received!

I think it's 2 years. Probably at least 1.

That's right, it isn't your prime residence. If you want to avoid CGT you'll have to move back. I can't remember the time period - best have a google.

There is also account taken of the years that you have lived in the flat, prior to moving out. If you google you should be able to find the rules, they are fairly detailed.

You can move back for just one day and it can be your Principal Private Residence, but that won't change the fact that it was not your PPR for the period you rented it and the gain during that period may be chargeable.

However there are a number of reliefs that are likely to apply that may relieve all of your gain, in particular you can count the last three years of ownership as if you had been living there so it can be treated as your PPR for that period, and Lettings Relief can effectively double the amount of relief.

Full details here or see an accountant.

OK, that's really helpful - thanks very much.

Moving back in for one day won't work - you need to establish residency properly - change addresses, electoral roll etc . - quality rather than quantity of occupation and keep evidence. HMRC quite hot on this now.

Having said that if it was your main residence previously, may not be necessary as you will get final three years, previous period of occupation and letting relief and annual exemption, you need to work the numbers.

I think you are missing the point roquefort - which is that whatever the OP does now is not going to affect the capital gain that accrued during the period the flat was rented out so there is no point moving back in at all (unless the flat is not going to be rented out for some time).

I acknowlege that my reference to moving back for a day was somewhat flippant: although in theory the length of time is not relevant it would be difficult to establish a "degree of permanence, [and] some degree of continuity or expectation of continuity" (Goodwin v Curtis) in just 24 hours. However if you did claim that you moved back for one day and therefore claimed PRR for just 1/1500 of the capital gain (or whatever) I don't think HMRC would bother to investigate electoral records.