Selling 5 buy-to-let props and avoiding Capital Gains tax
Discussion
Have 5 properties in London purchashed about 5 years ago for 100k each now worth about 250k each, looks like the capital growth rates slowing and I am now having problems finding tenants due to over supply, and feel that its time for a change
I've been told numerous stories (in the pub
) on avoiding CGT, i.e. moving in to the property for 3 months and avoiding the last 3 years Capital gain on 1 property , or better still moving abroad and becoming non-resident, I been told I can come back up to 90 days a year, are my friends trying to get rid of me or is it true ?????? who knows the answer
I've been told numerous stories (in the pub
) on avoiding CGT, i.e. moving in to the property for 3 months and avoiding the last 3 years Capital gain on 1 property , or better still moving abroad and becoming non-resident, I been told I can come back up to 90 days a year, are my friends trying to get rid of me or is it true ?????? who knows the answerMoving in for three months MAY be of use if you can establish that the property really WAS your main residence during that period.
There is no hard and fast "time period" rule for establishing Principal Private Residence". If a dispute arose with the Revenue, they would establish what your residence really was by examining the overall facts.
For instance, where are you living now and what would happen to that property whilst you were establishing a PPR eleswhere?
You might be able to work a move like that once, but not five times in quick succession.
Regarding living abroad, that is a possibility too - but what about the tax rules of the country you intend to move to?
Establishing non-UK tax residency (especially for someone who is ordinarilly resident in the UK for tax purposes) is not easy.
There is no hard and fast "time period" rule for establishing Principal Private Residence". If a dispute arose with the Revenue, they would establish what your residence really was by examining the overall facts.
For instance, where are you living now and what would happen to that property whilst you were establishing a PPR eleswhere?
You might be able to work a move like that once, but not five times in quick succession.
Regarding living abroad, that is a possibility too - but what about the tax rules of the country you intend to move to?
Establishing non-UK tax residency (especially for someone who is ordinarilly resident in the UK for tax purposes) is not easy.
Edited by Eric Mc on Thursday 4th January 22:29
Smartie said:
Another thing to consider, to minimize the gains rather than elimnate them, is to sell one in each tax year; that way you will get your annual CGT allowance on each property.
Can you get one of them sold before 05/04/07??!
Definitely good planning there. Can you get one of them sold before 05/04/07??!
Another option MAY be to sell some of the chattels (fittings, carpets, curtains, kitchen stuff, any furniture...although check which you ARE legally allowed to separate from the sale of a property first!) in the home separately, esp. if you have invoices proving what you paid for them...that way the proceeds from them aren't part of the property sale, and as they will be sold for less than purchase price there's no CGT on them as independent chattels.
One other thought:-
Eric, you're probably closer to this than me...am I right in thinking that CGT permits "carry-back's" to prior years?
What you need is a good tax consultant, not advice from a public motoring forum. Find one that's a Chartered Tax Advisor (CTA) or use the search tool here: www.ciot.org.uk/membersdirectory.exe
Eric Mc said:
"Carry back" of what?
Carry-back of gains. Or equally, carry-forward of allowances. I was sure you could use the prior year allowance as well, and there's one tax (not certain which...good few years since my ACA exams) which permits 6 or 7 years carry-forward of allowances.
Wouldn't you be better off reducing rent for competitive advantage, keep all the properties rented out, and work out a proper exit strategy? Selling five in rapid succession is going to get your collar felt, but living in each for 12 months as your genuine PPR before selling might work. Personally I'd be using some of that equity gain to fund further investment, perhaps not more rental properties, but I'd be sweating those assets!
Bad choice of thread title BTW - "managing Capital Gains liability" would have been more diplomatic.
Bad choice of thread title BTW - "managing Capital Gains liability" would have been more diplomatic.
Edited by victormeldrew on Friday 5th January 11:16
havoc - I'm pretty sure there is no ability to carry forward unused annual CGT allowances or to carry back gains in one year to a previous year where the allowance might have been unused.
The normal assumption is that the CGT Annual Allowance applies to gains made in that tax year only. If noi gains were made that year, the allowance is wasted.
I am pretty sure that Capital Losses can be carried forward against future Capital Gains, however.
There are lots of reliefs availble under CGT. These reliefs are multitudinous and complex and essentially depend on the nature of the asset being disposed of.
The normal assumption is that the CGT Annual Allowance applies to gains made in that tax year only. If noi gains were made that year, the allowance is wasted.
I am pretty sure that Capital Losses can be carried forward against future Capital Gains, however.
There are lots of reliefs availble under CGT. These reliefs are multitudinous and complex and essentially depend on the nature of the asset being disposed of.
I think you must be right Eric - was probably mis-remembering loss carry-backs! 
This, while not an EASY read, is a fairly straightforward summary of what can and can't be done with CGT:-
www.hmrc.gov.uk/leaflets/cgt1.htm
This, while not an EASY read, is a fairly straightforward summary of what can and can't be done with CGT:-
www.hmrc.gov.uk/leaflets/cgt1.htm
Jared_m said:
What you need is a good tax consultant, not advice from a public motoring forum. Find one that's a Chartered Tax Advisor (CTA) or use the search tool here: www.ciot.org.uk/membersdirectory.exe
I used to always recommend posting the same question on www.taxationweb.co.uk/forum at the start of a thread but now I wait to see how the thread goes. There is a lot of knowledge of taxes on this forum. I'm surprised that you didn't notice.
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