Private residence relief - cgt

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    Private residence relief - cgt

    I purchased an old dilapidated cottage in Oct 2017 and it was then demolished in May 2018, but I never lived in the cottage. A new house was then built and completed in March 2019 when I then took occupation. I have since met a lovely guy and am going to move in with him next month. I have made about £100k profit from this project and if I sell now I would not pay CGT, as its been my main residence for about a year. However, I am considering renting it out for 18 months and take advantage of the Private Residence Relief, ie I can rent it out for 18 months before I pay any CGT, although I realise there is currently a potential change of law, which may reduce this to 9 months.

    My question is - on the CGT form, the wording is "You have one home and you've lived in it as your main home for all the time you've owned it". But in my case, I have owned the land on which stood the old cottage, but have not lived in it all the time I have owned it, ie it stood empty, then demolished. I assume HMC will not charge me CGT on this period of time, although I was not living there nor was I renting it out, it was just empty????
    Thanks



    #2
    Why would you "not pay CGT" if you have been resident for 1 year of 2.5 years on a £100K profit. That's simply not the case. You had some other residence - PRR is about residence not ownership.

    Arguably since it really is a totally new house some sort of two-period calculation might apply - on the land versus the house. I would definitely discuss this one with HMRC BEFORE selling - as you may want to live there longer to dilute the gain. The issue is whether they will regard the cost of the massive building work as a relief or effectively a sale of a new item to yourself.

    But anyway this is exactly how some developers escape tax while the rest of us pay - building houses, pretending to live there (or actually living there) for some nominal time, and effectively writing all of their business profits (millions) to CG on own homes.

    Comment


      #3
      It's not a potential change in law, the 18 months relief will be 9 months for completions after April 5th.
      Letting relief will only apply to live in landlords from the same date.
      When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
      Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

      Comment


        #4
        You can only claim one main residence at any time.
        If you have owned it since Oct 2017 and the old building was replaced by a new building before you moved in , you can claim the period before moving in was for improvement work on your main residence. If you have not claimed main residence at another address, then you should claim it for this current address. As owner occupier and no subletting , you should be able to sell without CGT.
        Don't risk diluting your main residence exemption by renting for 18 months ( PPR relief reduces to 9 months in April ) .

        Comment

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