Any tax experts on tonight? I think my Dad has been given duff advice.

[giddykipper]

The problem is that he has taken free advice from the IoD and therefore (as I have pointed out to him) he can't sue anyone if the advice is wrong.

I have a rudimentary tax knowledge and I think the advice he has been given is wrong.

The basic facts - there is the PPR and a second home (currently a holiday let, but clearly the rules are changing and it will be liable to full CGT).

He has been told that he can sell his PPR, pay no CGT on it, then move into his second home, designate that as his PPR and then pay no CGT when that is ultimately sold. Or if he lived in it until he died it would only be subject to IHT.

That doesn't seem right to me. I can't believe it's that easy to avoid paying tax on a second home.

This is basic tax and he should pay for an hour of accountants time to put him right. I think the gist of this is that if he lives in the 2nd home for a certain amount of time then a significant percentage of any increase in capital value is written off (dependant on how many years) and a set lump sum is too (I used to have this written down but have lost the lot I am afraid). There is definitely some truth in what he has been told but I just don't know the details. Most accountants will know the answer to this - hope one comes along soon.

found this on another old thread (from 2007) so will need checking:

capital gains*:
as the property has at some point been your principle private residence, then when you do eventually sell it the last 36m of ownership are treated as if you live there, so if you sell after letting for 3 years there will be no capital gains tax to pay.

• if you sell after more than 3 years then only the pro-rata proportion of the gain for the time you were letting, less the 3 years, will be subject to capital gains. ie own and live in for 10 years, rent for 5 years, tax on 2/15th's of gain.(not taxed for first 10 years, or last 3 years).
• following this, you will then get capital gains lettings relief (more complicated so I am not going to explain) which would reduce any capital gain still further.

www.mumsnet.com/Talk/legal_money_matters/340933-letting-a-property-what-tax-do-you-pay

Can you wait til tomorrow and I am in work But would broadly agree with old post. That said with all the piss taking on flipping houses by mps I wouldn't guarantee that the rules would remain unchangrd.

Thanks both. I am an accountant but not a tax expert. I have told him that he should pay for advice, that this is basic and a tax adviser will be able to answer the question in half an hour, costing max £100, which is nothing in the grand scheme of things.

I was aware of the final 36 month rule, I just can't find any evidence for the advice that the whole of the period of ownership would be CGT free.

If I ask at work I will get shouted at for disturbing them in the run up to 31 Jan!

I have never heard of the whole period of ownership being CGT free unless after the 36 month rule amount has been deducted the sum which is left is entirely eaten by the lump sum deduction also made.

thought that old post was familiar - I wrote it! lol.

The whole period of the ownership would not be CGT free automatically. As others have said, the last 36 months would be, as would any other period it had been his PPR. Letting relief may be available but that gets quite complicated.

It is quite true that if he owns it until death (whether or not he lives in it) no CGT is due, only IHT (on the full value of the asset, not the gain). The is the case with all assets on death.

Perhaps that's what this adviser is getting at then cleanandclothed, but he would have to own in until death to avoid CGT, which is quite a commitment when you're in your 50s.