CGTax and sale of main residence?

[Mable2]

Dear mumsnet users,
From reading the government website, am l correct in saying l don’t pay any cgt on the property that l have lived in for the last year as my only residence? For the three previous years it was let out.

To the selling solicitor or is it HMRC, we would just have to declare time spent living there as main residence and period of time it was let out ? Would we need any proof, eg council tax or utility bills?
thanks

I don't know about the admin of it, but no, you don't get the exemption for the whole time, just the time you were living there (plus some other rules around allowable time living elsewhere).

https://www.gov.uk/tax-relief-selling-home

Use this calculator to work it out. You will get some Principle Private Residence relief against the gain.

Remember any improvements you made can all be offset against CGT and you're only paying CGT on the gain, not the total

They have to be capital improvement. So converting the loft, extending the kitchen etc. whereas if you replace double glazed windows with double glazed windows that is not a capital improvement.

You can also claim the estate agent and solicitors costs for both the initial purchase of and the sale of the property.

No CGT will be due as we will not proactively say it has ever been let out without being asked. ~10 years ago 3 of our properties were sold here in Scotland, and these properties were let out and nothing asked. no CGT paid. are yourselves ever asked if the property you are selling is a main residence and proof of?

So your question is how easy is it to evade tax?

Just to warn you I work in tax and HMRC are getting more proactive in writing to people saying they have information they have sold X property and they believe they need to complete a CGT return. If you are then found to have not completed one where necessary there can be quite high fines and penalties.

HMRC are able to access a lot of information about you including your bank accounts so I would be wary about not competing a CGT return. Depending on how much of a gain you have made after deducting buying and selling costs, any improvements, principle private residence relief for the time you lived there etc you may not have much to pay anyway.

This strikes me as a high risk strategy- chances are that within the government there are either records of you living somewhere else or other people living in the house you’ve sold within the last 4 years (council tax, HMRC correspondence, electoral roll, passport application, payment of benefits). I’m not sure I’d risk being prosecuted for tax evasion for the sake of a few grand. Chances are if you study the rules or get a decent accountant on board you can save tax legally. Or just live there for a bit longer.

Angela Rayner got away with it. Hope you do too.

Omitting to tell the authorities is tax fraud.

It is your responsibility alone to make the necessary return within the statutory timescales and pay the tax due if any. It is not part of the sale process itself, it's a personal responsibility so if you haven't done it you are at risk of getting caught and tracked down and HMRC has years to come and ask for it.

As others have said, HMRC also gets a lot of information about the sale so have what they need to piece it together if they did look into you.

Yes
and I'm pretty sure that the form you fill in for sale asks these questions about whether it was rented

how did you get away with it in Scotland OP - is the CGT law different?

It’s SELF assessment, the law requires you to submit tax returns to declare rental income and capital gains. Sounds like to want to illegally evade paying tax on both rental income and capital gains.

We are taxed as "self-assessment" it is the responsibility of the tax payer to declare a chargeable gain. Not up to others to ask questions.

Did you pay tax on the rental income?

unless you intend to commit illegal tax evasion by declaring untruths you will be liable for CGT so no, you are not correct.

your gain will be the difference between its selling price and its purchase price less legal and EA fees on purchase & sale. (Other costs need to be capital in nature as others commented).

from that gain you need to work out the % of your ownership period when it was your only/main residence.

You need to do that using months (or days), not years, but for the sake of illustration only it appears you lived in it for 1 out of 4 years ownership and that 1 year is at the end of your ownership. The fact you are in residence to the date of sale means you will be overlapping the final 9 months of your ownership period so will not be entitled to add that on to your occupation period.

in very crude terms therefore you will get relief for 1/4 of your ownership. Obviously that means you will be liable to CGT on 75% of the value of the gain

You have 60 days from the date of completion of the sale to report and pay the CGT to HMRC, if not penalties will be incurred. You will also be required to re-declare the figures on the end of year tax return so your final tax liability can be checked.

PS unless you have also been evading declaring the rental income, HMRC computers will easily match rental status to property sale and flag that CGT may be due. Land Registry sales records are notified to HMRC so they know when it has sold. It is then down to will a human being take action over that data