Holiday let CGT
Discussion
Morning all, hoping someone can advise on some potential CGT issues.
Around 2007 my mother and step father (not married) bought two properties, equal shares in each. One they live in, one they let out as a holiday let.
They're both old and fed up with each other so are considering splitting up, one lives in the holiday let, one lives in the original property.
At the moment if they decided to dispose of the holiday let it would have a pretty significant CGT bill as the property values have grown substantially in the 16 years they've had them.
If the party that moves into the holiday let makes it their proper residence, moves bills, bank accounts etc etc to this address would that wipe out the CGT liability? They're both very elderly now so trying to get this sorted before it has a CGT/IHT bill to pay.
I did look at the stamp duty implications and it looks like as it's a separation and no transfer of cash, just swapping equity in the property it should be exempt of any stamp duty.
Although I'm wondering as part of it should I get my mother to gift me £250k worth of the property she has so that there would be no stamp duty to pay to her but so long as she lives 7 years it would reduce her estate by 250K and therefore the IHT.
Any advice please?
Thanks
Around 2007 my mother and step father (not married) bought two properties, equal shares in each. One they live in, one they let out as a holiday let.
They're both old and fed up with each other so are considering splitting up, one lives in the holiday let, one lives in the original property.
At the moment if they decided to dispose of the holiday let it would have a pretty significant CGT bill as the property values have grown substantially in the 16 years they've had them.
If the party that moves into the holiday let makes it their proper residence, moves bills, bank accounts etc etc to this address would that wipe out the CGT liability? They're both very elderly now so trying to get this sorted before it has a CGT/IHT bill to pay.
I did look at the stamp duty implications and it looks like as it's a separation and no transfer of cash, just swapping equity in the property it should be exempt of any stamp duty.
Although I'm wondering as part of it should I get my mother to gift me £250k worth of the property she has so that there would be no stamp duty to pay to her but so long as she lives 7 years it would reduce her estate by 250K and therefore the IHT.
Any advice please?
Thanks
If one individuial moves into the current holidy let, from that moment on it becomes their main residence. If and when that property is eventually sold, the individual who is living in the former holiday let will get time apportioned CGT main residence relief on their share of the gain.
The other individual will not get any relief on their share of the gain as it was never their main residence.
Keeping an accurate record of important dates is crucial in these circumstances.
The other individual will not get any relief on their share of the gain as it was never their main residence.
Keeping an accurate record of important dates is crucial in these circumstances.
There are some reliefs available but it's not that straightforward. This may help
https://www.gov.uk/government/publications/private...
EDIT: there is also a lower CGT rate available for "Furnished Holiday Lets" , though I think you needed to claim this during the relevant years so you may be too late but worth checking.
https://www.gov.uk/government/publications/private...
EDIT: there is also a lower CGT rate available for "Furnished Holiday Lets" , though I think you needed to claim this during the relevant years so you may be too late but worth checking.
Edited by hooters123 on Thursday 9th March 13:50
Furnished Holiday Letting income is NOT rental income. It is a special type of income which is closer (but not identical) to profits generated by a trading activity.
Therefore, when a furnished holiday let is sold, the Capital Gains Tax calculation is similar to what happens whena business is sold rather than when a non main residence residential property (such as a buy to let) is sold.
If you were operating a holiday let for a number of years, you should have been returning the profits every year under the "holiday letting income" section of your self assessment tax return.
Therefore, when a furnished holiday let is sold, the Capital Gains Tax calculation is similar to what happens whena business is sold rather than when a non main residence residential property (such as a buy to let) is sold.
If you were operating a holiday let for a number of years, you should have been returning the profits every year under the "holiday letting income" section of your self assessment tax return.
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