Can someone help explain CGT liabilty please

[htrj]

Hi,

Ive just been reading through HMRC helpsheet 283 and I can't make sense of it.

My mother is retired but rents out what was her principle residence in England. The house was rented out between August 2007 - August 2009, she moved back in between September 2009 and Jan 2010 and then let it between Jan 10 and Jan 11. The tax office are aware of these tenancies.

She would now like to move back into the house in 2012 after renting it for another year. What will she have to pay CGT on if she doesnt move back into it until then? What would be the best course to avoid CGT?

[Telometer]

When did she buy it? How much did she pay for it? What is it worth?

[htrj]

2002 bought for 425000.

2009 went on the market, accepted offer of 630000. Sale fell through as buyer couldnt raise mortgage.

Value now is probably the same as 2009.

Also, I notice that the helpsheet mentions CGT on the anything over 1 and a bit acres. This house has 2 acres.

[Telometer]

Is it a mansion for which 2 acres is reasonable, or is it a paddock?

[htrj]

Its all landscaped and used as garden and I suppose that area of grounds is justified for the calibre of house. Livestock are not and in our ownership never have been kept on it.

[TaxationPete]

The fact that the land is all matured garden, and she is not going to sell part of the garden, which probably would attract CGT, then selling the whole property should not be an issue in terms of CGT and the districk valuer may look at the case but I have seen larger PPR land plots be sold as a whole with no problem.
The period your Mum has been away from the property are covered here :
http://www.hmrc.gov.uk/manuals/cg4manual/CG65030.htm
Note, that the periods are acculative and in your Mums case are two periods of absence less that 3 years and for 'any reason'
Regards Peter

[htrj]

For clarity can we just confirm that as the total of the two periods of absense will be greater than 3 years there will be a liability?

Will CGT be due on the total rent gained throughout the tenancies.
The rent gained after the third year or, most worryingly, the increase in purchase to sale price of the house after she moved back in. She will move back into it for at least 5 years.

[Telometer]

CGT would only be due if the property is eventually sold. There is no CGT to pay until then. Is that your concern?


Where does your mother live when not in this house?

[TaxationPete]

The periods of absence are allowed and exempt of CGT read the link I sent you again, it is quire clear and has examples. Regards Peter

[htrj]

Telometer. My concern is what is she going to pay cgt on when she comes to sell the house? The rent gained after the first three years but before moving back in or the gain between buying the house and selling it now that she has been away from it for more than three years.

Peter. Thanks for the link, i will re read it.

[Telometer]

Where does your mother live when not in this house?

[htrj]

With me, In Spain although she is not Spanish resident.

She will have accomodation in the grounds of the house discussed within the next few weeks.

[TaxationPete]

CGT and rental icome are not linked. She should have been paying Income Tax on the rental profit as a non resident landlord.
From what you have stated there will be no CGT on dispoal of the property as the periods you say she was absent are exempt under the link I gave you are are nothing to do with the last 36 months rule. Regards Peter

[Telometer]

From what you have stated there will be no CGT on dispoal of the property as the periods you say she was absent are exempt under the link I gave you are are nothing to do with the last 36 months rule. Regards Peter

I disagree. Mother will be moving "into the grounds" of the house, not the house itself, the years of absence for any reason do not qualify.


OP, if not Spanish resident, where IS she resident? On a cruiseliner?


She may well turn out to be Spanish resident, with potentially further Spanish tax due on the profits as well as UK tax.

[TaxationPete]

I know of no restiction as to the use of the property whilst the owner is absent for any reason, or work related absence.
http://www.hmrc.gov.uk/manuals/cg4manual/cg65067.htm
Can you detail why she does not qualify for these periods of absence.
How long is she going to move back into the house as her home before disposal. Regards Peter