CGT implications on a house I have bought and intend to sell

CGT implications on a house I have bought and...

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Hi,

I bought a house in May 15, I have spent a lot of money on the house but after a valuation from 3 estate agents, I am going to make a gain of £50k and I could sell it way before the start of the 16/17 tax year.

As far as I understand it, if I live in the property for about a month and make it my Principal Private Residence then I could claim the '18 months of deemed ownership' rule when calculating my PPR Relief. Seeing as I have owned the property for less than 18 months, would that mean that I have full PPR relief on the property and therefore, no CGT to pay.

Is this correct or have I overlooked something?

Replies (20)

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Stepurhan
By stepurhan
02nd Feb 2016 11:23

Not as simple as that

What you have missed is that making somewhere your Principal Private Residence isn't as simple as living in it for about a month. There is a wealth of case law from people trying just that and losing in the courts. The fact that you always intended to sell, especially given there is evidence of that intention (that you have had 3 estate agents value it) is likely to prove fatal to any claim.

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Replying to Tax Dragon:
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By LaticsFan101
02nd Feb 2016 11:26

Thank you, I thought it was too good to be true!

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Portia profile image
By Portia Nina Levin
02nd Feb 2016 11:25

Trading! Trading! Trading!

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Replying to Matrix:
By cheekychappy
02nd Feb 2016 11:27

Beaten

Portia Nina Levin wrote:
Trading! Trading! Trading!

By Freddie Fast Fingers.

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Replying to neiltonks:
Red Leader
By Red Leader
02nd Feb 2016 11:34

trading?

I don't think that the OP has said that he bought it with the intention of selling at a profit. If I was selling my house, I would have three estate agents around. I don't think this on its own is relevant to the trading issue. I'm descending to the anecdotal here, so forgive me, but nearly everyone who buys a house in my street these days seems to spend £50k+ on a refurb.

The main issue I think is establishing a credible case for residence.

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By cheekychappy
02nd Feb 2016 11:25

CGT may not be due. Income

CGT may not be due. Income tax might be more relevant.

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By LaticsFan101
02nd Feb 2016 11:36

To clarify, my plan was to live in the house but my partner changed her mind after the property was finished which was a huge blow to me, as you can imagine. I'm just trying to find the most tax efficient way of getting rid of it. 

I should have said this in the original post.

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Replying to User deleted:
By Paul D Utherone
02nd Feb 2016 11:42

Well if you can prove that

connorharnedy wrote:

To clarify, my plan was to live in the house but my partner changed her mind after the property was finished which was a huge blow to me, as you can imagine. I'm just trying to find the most tax efficient way of getting rid of it. 

I should have said this in the original post.

you might have a chance at CGT, and possibly even PPR relief, though it would still depend on whether you truly live in it as your main residence. That'll be down to fact and being able to prove the intentions from the outset. Are you still with the partner you intended moving into the property with, or not?

As initially posted I would certainly have said that you were looking at trading and income tax rather than CGT and a possibility of PPR

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By Tim Vane
02nd Feb 2016 11:38

Don't believe the estate agent's valuation. You may yet make a loss. Good luck though.

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By LaticsFan101
02nd Feb 2016 12:09

Yes I'm still with her and we could definitely move in for a few months if need be, she might even find she wants to live there after all which would be the ideal situation.

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Replying to Open all hours:
By Paul D Utherone
02nd Feb 2016 13:00

The trouble with...

connorharnedy wrote:

Yes I'm still with her and we could definitely move in for a few months if need be, she might even find she wants to live there after all which would be the ideal situation.

is that the intent in doing so is unlikely to satisfy HMRC or a Tribunal that the property ever became your main residence for this purpose, though of course if there was a change of heart and you stayed there problem solved.

As for...

Justin Bryant wrote:
And do not have a history of such things, I think this would be capital based on HMRC's guidance in the link below:

http://www.hmrc.gov.uk/manuals/bimmanual/BIM60000.htm

 

... that may be so based on the later clarification provided to the OP.

The suggestion of trading in the initial replies came from the the question as originally posed which was of the style of "I bought a property, did work to it and am now intending to sell it 8 months later at a profit. Can I move in and not pay any CGT on it?" to which the reply was understandably "are you really so sure that it will be CGT anyway?" That original apparent intent for a quick sale with a profit motive from the outset is rather changed by the follow up re the partner not wanting to move in. Do it once in that circumstance might be OK. Keep doing it won't be

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By cheekychappy
02nd Feb 2016 12:13

Did you add a patio?

Patio + partner = problem solved.

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Replying to Youareatit:
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By LaticsFan101
02nd Feb 2016 12:14

I didn't add a patio but I could. How would that change things?

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By cheekychappy
02nd Feb 2016 12:14

Easy

You bury her under it and live there.

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By LaticsFan101
02nd Feb 2016 12:17

Ha ha, that might be the only option in the end.

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By User deleted
02nd Feb 2016 12:17

....

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By Justin Bryant
02nd Feb 2016 12:43

If you are not a builder
And do not have a history of such things, I think this would be capital based on HMRC's guidance in the link below:

 

http://www.hmrc.gov.uk/manuals/bimmanual/BIM60000.htm

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By LaticsFan101
02nd Feb 2016 12:46

Okay, thank you very much for your help. Looks like I have a big tax bill coming unless there is a change of mind

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By Jim Broome
02nd Feb 2016 13:14

Look on the bright side...

Look on the bright side, any tax bill won't be as high as the amount of net profit after tax!

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By The Grammar Police
02nd Feb 2016 17:34

Timescale?

How can you live in it for a month and sell it within 2015/16? Have you got a buyer arranged and the legals all in place?

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