CGT liability - Have a interpreted primary residence rules correctly- Help

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    CGT liability - Have a interpreted primary residence rules correctly- Help

    My wife and I own 2 U.K. properties.
    Property 1 we had built 23 years ago and was our family residence up until 4 years ago. Since then we have rented out the property for short term holiday lets (approx 20 weeks per year) and our main residence is now property 2 which was built 4 years ago. However we are still on the electoral register and have our bank accounts registered at Property 1.
    We have not declared to HMRC which should be our primary residence!
    We currently have property 1 up for sale although as it is a substantial property may take some time to sell whereas property 2 would sell relatively quickly. We do need to sell one of them in the next 12 months.

    Question A - Will HMRC class property 2 as the main residence and therefore be liable for CGT on property 1
    Question B - If we are liable for CGT on Propery 1 will we get a relief? I have read that we would not be liable for CGT for the period that it was our main home or for the last 3 years of ownership. In addition to this there is an allowance of up to 40K as it has been rented therefore I have calculated;
    Original costs of Property 1 = £50K
    Current value of Property 1 = £500K
    period of ownership = 23 years
    amount liable for CGT = 450/23 = £20K
    As this is less than 40K there would be no liability! Is this true?
    Question C - Can I therefore sell Property B at any time with no CGT liability?
    Much appreciated.

    #2
    Your PPR is a matter of fact. That is where you live. Not moving your address was not ireal but not a show stopper.
    Yes LR will be available:
    In a case heard in 1990 (Owen v Elliott (CA 1990) the Inland Revenue (as it then was) lost and it was held that if the property has been the taxpayers principle private residence at any time and it therefore had a period of exemption from Capital Gains Tax then the Residential Lettings Exemption (max (£40,000) is available. (TCGA 1992 s 223)
    And that is per owner so I would suggest there is no CGT liability but you need to check exactly how many you rented the property out for. Remember that you do not get LR in the last 36 months of ownership.
    Yes your present home is free of CGT liability. Regards Peter

    Comment


      #3
      Lettings relief only available to cover approx 20 weeks for which property rented during the year that was four years ago (i.e. during the year you correctly identified). Not available for weeks property not let. But you also both have your annual exempt amounts of 10k which is likely to cover any other gain.

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