If I sell will I pay Capital Gains Tax ?

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    If I sell will I pay Capital Gains Tax ?

    Hi, I bought a house in August 2015 (using money I had inherited in 2012, and a 50% mortgage). It's my first ever house purchase. I haven't lived in the house as I have a council tax reduction for renovation/ structural work and it being unoccupied. No work has taken place yet as I'm waiting for planning application approval. I originally bought the house to live in but discovered the house has potential to get permission for another house to be built on the garden, due to family members being in the building trade it was obvious to explore the potential. Assuming I get planning approval, if I were to sell the house straight away without living in it, will I have to pay capital gains tax ?

    Any feedback would be much appreciated.

    #2
    No, I don't believe so. It's your one and only owned house, and we are all allowed one of those, to sell as we wish. After all, you could have been touring the world for the last year, it's still your house....!

    Just check on the garden plot situation though. I can't remember exactly, but I think there's a rule about when you divide it, and how you sell each.

    Comment


      #3
      You need to live in the property for atleast one year to proves its your principal residence , before you can claim exemption after sale to capital gains tax. So move in if you want to claim exemption to cgt.

      Comment


        #4
        The exemption applies to your principle residence, not property.
        And your residence is where you live.

        The OP is clearly (and on record) not resident in the property because of the council tax reduction.
        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


          #5
          Originally posted by Gordon999 View Post
          You need to live in the property for atleast one year to proves its your principal residence , before you can claim exemption after sale to capital gains tax. So move in if you want to claim exemption to cgt.

          Originally posted by jpkeates View Post
          The exemption applies to your principle residence, not property.
          And your residence is where you live.

          The OP is clearly (and on record) not resident in the property because of the council tax reduction.
          Both the above are inaccurate, please read the following;

          http://www.hmrc.gov.uk/manuals/cgmanual/cg64420+.htm

          Comment


            #6
            The exemptions for an unoccupied "residence" don't look relevant here, although it would be worth the attempt to extent the 12 month delay in taking up residence...
            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


              #7
              How big is the garden? If more than half a hectare it could cause problems even if the house is your main residence.

              Comment


                #8
                Thanks for all the input. It seems fairly confusing as to what the law says.
                What would be the best steps for me to take next ? Declare this as my main house? But surely as its my only house it doesn't matter ?.. I'm currently staying at various houses of parents and friends and visit the house regularly

                Comment


                  #9
                  Hi Pebblepebble thanks for comment. I'm not sure on size, but it is not more than 500m. What impact does size have ?

                  Comment


                    #10
                    The answer to your original question is "No", (selling your house which you haven't lived in for up to three years, reason is immaterial) see link

                    http://www.hmrc.gov.uk/manuals/cgmanual/cg65030.htm

                    But you must double check the bit about slicing off the garden, and then selling the house. Ask a good Accountant or Conveyancer because I'm not sure if this has tax implications.

                    So why not get the planning permission, then sell the whole (but NOT sliced up into separate titles)? Because 'the whole' is still your PPR, it just comes with planning etc.

                    Comment


                      #11
                      It's not her PPR she has never lived in the property. Regards Peter

                      Comment


                        #12
                        Originally posted by TaxationPete View Post
                        It's not her PPR she has never lived in the property. Regards Peter
                        But the link clearly states can be absent for up to three years, and this definition satisfies the 'residence' test. It's the same as a first time buyer couple, they buy a house, think about it for 6 months, then decide to sell it, they've done nothing wrong, and don't owe the taxman ought! The only bit to be careful about is the selling house whilst retaining part of the Title.

                        OP, go and speak to a good Accountant or Conveyancer.

                        Comment


                          #13
                          You can't be absent from a residence if it's never been a residence.
                          It has to become a residence before you can be absent from it for any period at all.

                          The notional first time buying couple would be in the same boat, unless they were decorating or doing up the place or building the property.
                          There are specific exemptions for delays in moving in.

                          I'd have thought that the waiting for planning permission might be worth exploring as it's potentially going to be a lot of tax otherwise.
                          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


                            #14
                            CG65030 - Private residence relief: periods of absence: introduction
                            TCGA92/S223 (3)
                            TCGA92/S223 (3) treats certain periods of absence from a residence as periods of residence if the conditions set out at CG65046 are fulfilled.

                            The purpose of the legislation is to avoid the need to keep detailed records of absence from a residence to compute small restrictions to relief and to cater for the individual who is obliged to be absent from their residence for a time.

                            Section 223 (3) sets out the qualifying periods of absence as follows:

                            Any periods of absence for whatever reason which do not exceed 3 years in total, Section 223(3)(a), see CG65040.

                            http://www.hmrc.gov.uk/manuals/cgmanual/cg65030.htm

                            So that can include from the moment one buys it to the moment one sells it, within the prescribed period right? It's a residence because it's a dwelling house.

                            Comment


                              #15
                              http://www.hmrc.gov.uk/manuals/cgmanual/cg65050.htm

                              According to CG65050, the periods before and after "the period of absence" must be your main residence .

                              So OP has to physically move into the property and live in residence by paying for one year to re-directing mail from old residence, paying full council tax for at least on year , registering with local doctor, registering with tax office for sending tax return , registering address with employer sending kid to local school, joining local library, getting name and address listed in local telephone directory etc

                              Comment

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