Main residence

[rfisher]

Scenario:

You own 2 houses in joint names and individual 1 lives in house 1 while the other lives in the other house.

You sell house 1.

Does individual 2 have a CGT liability on their half of the profit on house 1?

Hmmm?

Also, what are the factors taken into account regarding which residence is deemed to be an individual's main residence? Is it paying Council Tax for that property for example. Finally, how long do you have to be living in your main residence before CGT does not apply?

Ta.

[mrmaggit]

Answer to last question is two years. Don't know too much about the rest.

[Eric Mc]

mrmaggit said:

Answer to last question is two years. Don't know too much about the rest.

Where did you get that from?

From my understanding there is no time limit. In fact, you can have a Main Residence status allotted to a property you have never actually lived in.

Circumstances and context are all.

[Eric Mc]

If you own two properties, you can "elect" to have any one of the properties deemed to be the Main Residence - provided the seller has lived (or intended to live) in it.

[bleesh]

Contact your MP for advice on this ;-)

[V12Les]

A bit late now but you should have had one house in your name and the other in your other halfs name, no CGT to pay then. At least you'll know for next time.

[rfisher]

Eric Mc said:

If you own two properties, you can "elect" to have any one of the properties deemed to be the Main Residence - provided the seller has lived (or intended to live) in it.

Got a link to more information on this by any chance?

Thanks.

[SGirl]

V12Les said:

A bit late now but you should have had one house in your name and the other in your other halfs name, no CGT to pay then. At least you'll know for next time.

How does that work, then? Sorry for the thread hijack, but we're currently also looking at the main/non-main residence thing and our properties are going to be one in his name, one in mine.

As far as I understand it (which isn't far... ) you don't pay CGT on your main residence, is that correct? What does having the properties in different names have to do with it?

[SGirl]

rfisher said:

Eric Mc said:

If you own two properties, you can "elect" to have any one of the properties deemed to be the Main Residence - provided the seller has lived (or intended to live) in it.

Got a link to more information on this by any chance?

Thanks.

The Revenue's own site is pretty good:

http://www.hmrc.gov.uk/cgt/property/basics.htm

[V12Les]

SGirl said:

V12Les said:

A bit late now but you should have had one house in your name and the other in your other halfs name, no CGT to pay then. At least you'll know for next time.

How does that work, then? Sorry for the thread hijack, but we're currently also looking at the main/non-main residence thing and our properties are going to be one in his name, one in mine.

As far as I understand it (which isn't far... ) you don't pay CGT on your main residence, is that correct? What does having the properties in different names have to do with it?

Probably better to get your accountant to explain the details. I just do as my accountants advise, your allowed one property in your name and one in your spouses', works for me.

[rfisher]

SGirl said:

The Revenue's own site is pretty good:

http://www.hmrc.gov.uk/cgt/property/basics.htm

Isn't it just!

"Working out the relief
To work out the relief, you need to work out the period that you've owned your home for. This starts on the later of:

the date you bought or acquired it
31 March 1982
It ends on the date that you sell or dispose of it.

The final three years (36 months) always qualify for relief, even if you weren't living there, as long as it's been your only or main home at some point during the time that you've owned it."

but;

"Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.

The maximum amount of Letting Relief due is the lower of:

£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
Example
You used 60% of your house as your home and let out the other 40%.

You sell the property, making a gain of £60,000.

You're entitled to Private Residence Relief of £36,000 on the part used as your home (60% of the £60,000 gain).

The remaining gain on the part of your home that's been let is £24,000.

The maximum Letting Relief due is £24,000 as this is the lower of:

£40,000
£36,000 (the Private Residence Relief due)
£24,000 (the gain on the part of the property that's been let)
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief."

Are these not mutually exclusive?

In other words if you rent out 1 house that you have lived in previously then you lose the CGT relief on that house whether it's deemed your main residence or not?

[mrmaggit]

Eric Mc said:

mrmaggit said:

Answer to last question is two years. Don't know too much about the rest.

Where did you get that from?

From my understanding there is no time limit. In fact, you can have a Main Residence status allotted to a property you have never actually lived in.

Circumstances and context are all.

Something I seem to remember from Self-Builds. if you lived in the house you'd just built for further two years you could claim relief, if you sold before, you had to pay CGT.

Always ready to be corrected, though, Eric.

[Steve_W]

Had a look through some of the sections on the Revenue website - blimey, no wonder folks recommend using a tax lawyer!

One interesting point I noticed:

"Absences as you've moved out of your home
You may still get the full relief even if you didn't live in your home all of the time that you owned it. The final 36 months (3 years) that you own it will be treated as if you lived there, even if you didn't, as long as the property has been your only or main home at some time during the time that you owned it."

So to me that reads as though I could move out of my house (bought in 1994) and rent it out for 3 years, buy another house with my girlfriend, and after 3 years sell the rental house (my old main residence) and not pay any CGT - seems odd; I must have misread it?

[dirty boy]

Steve_W said:

that reads as though I could move out of my house (bought in 1994) and rent it out for 3 years, buy another house with my girlfriend, and after 3 years sell the rental house (my old main residence) and not pay any CGT - seems odd; I must have misread it?

That is exactly what it says.

[Coco H]

It works.

I deal with this sort of stuff a lot. It comes down to a question of fact. (and intention - though proving this can be hard).

[touching cloth]

V12Les said:

SGirl said:

V12Les said:

A bit late now but you should have had one house in your name and the other in your other halfs name, no CGT to pay then. At least you'll know for next time.

How does that work, then? Sorry for the thread hijack, but we're currently also looking at the main/non-main residence thing and our properties are going to be one in his name, one in mine.

As far as I understand it (which isn't far... ) you don't pay CGT on your main residence, is that correct? What does having the properties in different names have to do with it?

Probably better to get your accountant to explain the details. I just do as my accountants advise, your allowed one property in your name and one in your spouses', works for me.

This works if not married I beleive but if married you can only claim main residence in one of them (Eric maybe able to confirm??). CGT then liable on the other regardless of who owns it, but still possible to use the 3 year extension rule to some benefit if you swap around the nominated home.

[Simpo Two]

touching cloth said:

...still possible to use the 3 year extension rule to some benefit if you swap around the nominated home.

My word, this is like Mornington Crescent!