Buy-to-let now PPR

Buy-to-let now PPR

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An couple purchased a second property under a buy-to-let mortgage in 2006 and rented it out. The original intention being that this would be a long term investment.

They have since sold their principal private residence and are going to move into the buy-to-let property for a while whilst they look for their next home.

They are considering selling the buy-to-let if necessary to help fund the purchase of their next house but are concerned about the capital gains tax implications.

Will they get any exemption from CGT on the buy-to-let as it will genuinely have been their PPR for several months before they sell it or does that not count because they originally bought it as an investment?

Thanks
Sarah

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Euan's picture
By Euan MacLennan
07th Aug 2007 11:30

Yes
As the property will have been their only residence and therefore, obviously, their principal private residence, at some time during the period they have owned it, they will qualify for PPR relief in respect of their actual period of residence and the last 36 months of ownership in any event.

Provided they sell by 2009, that should cover all the letting period, but even if it does not, they will be entitled to the further letting exemption of the lesser of the PPR relief and £40,000.

Their original intention is irrelevant.

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By AnonymousUser
07th Aug 2007 13:43

Original intention
I agree with Euan on the principles.

Re the original intention, you might want to look at s224(3) TCGA 1992. Basically, it denies PPR relief where the acquisition of the property was made "wholly or partly for the purposes of realising a gain from the disposal of it".

I would have thought that many people buy-to-let to bring in income not necessarily a capital profit and/or as a reasonably long term hold in any case. Worth checking the manuals - the Revenue look at whether the primary motive is a quick buck (CG65212). The examples they give are someone acquiring the freehold when they already own the leasehold and conversion of a property into flats.

I would certainly claim PPR relief, although I might consider putting a note in the White Space.

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