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Calulating CGT with second home and PPR

Calulating CGT with second home and PPR

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August 2010 A Married couple purchase a house for £442500 intending to renovate it and live in it - but continue living at their previous address whilst renovations are done.

Renovations take longer than expected

August 2011 Couple let the property at a low rent, even though the renovations are not completed - to secure the property and prevent theft etc.

December 2014 Renovations complete with reciepted costs of £50000 - tennant moves out and the couple move in. Couple nominate the renovated house as their PPR (no previous nominations made).

August 2015 Couple sell the fully renovated house for £750000

What is their CGT bill?

Total gain: £750000-£50000-£442500= £257500

The first 12 months whilst being renovated and the last 18 months count as PPR https://www.gov.uk/tax-sell-home/absence-from-home

i.e 30/60 months count as their principal private residence

That makes the gain reduced to £128750

They are able to claim letting relief for the 39 months it was let out - this is up to £40000 each https://www.gov.uk/tax-sell-home/let-out-part-of-home

TOTAL TAXABLE CAPITAL GAIN: £48750 (£24375 each)

Am I barking up completly the wrong tree with this calculation?

Replies (5)

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By HeavyMetalMike
30th Jan 2016 21:51

first 12 months is PPR? Why?

Don't you have to have PPR before letting to get letting relief? ie actual lived in not some made up relief? You may be right. It's news to me.

If you are right then.........

gain of 128,750 each less 18/60th.= 38625

less Aug 11 to Jan 14 =.? But watch overlap of Feb 14 to Dec 14?

Doesn't matter as the lower of 18 months  PPR is the lowest.

128,750 less 38,626 less 38,625 less AE.

Each.

 

That's my guess

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Hallerud at Easter
By DJKL
30th Jan 2016 22:42

How are the renovations completed whilst the property is let to A N Other?

How do they get access to have them done?

Does the party letting from them have restricted use of the property during the period of lease?

 

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By cathygrimmer
31st Jan 2016 08:56

Residence?
I assume that, when you say they nominated it as their residence, you mean they made an election because they had more than one residence. If they moved in in December and sold the following August and kept using their old home throughout expect HMRC to argue that this was never a residence

4 years to renovate a house they intended as their home - but the renovations only cost £50k and they had tenants for most of the time until shortly before sale. I wouldn't want to take that one to court! Are you satisfied it was a residence?

Cathy

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By bassanclan
31st Jan 2016 09:46

The renovations DID take 4 years, I drove past the house seeing the painfully slow progress. The £50000 is the amount of RECIEPTS they have. The husband is a builder. It seems he did most of the work himself in between other proper paid work and at weekends and evenings.

 

They moved out of their old house in December 2014 and the old house was let in January 2015

 

The letting does seem a strange one, but apparently the property was vulnerable to be broken into as it was empty. They knew a lad who desperately needed somewhere to stay so let him live in the house at peppercorn rent on the understanding that renovations would go on around him. It was a "mutually beneficial" arrangment, they got the property "secured by occupation" and he got the run of a 4/5 bedroomed house with swimming pool!

 

Is secured by occupation a genuine letting as far as HMRC are concerned?

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By RetiredTax
31st Jan 2016 15:17

CGT & PPR
HMRC guidance *indicates the property needs to have been let on a commercial basis. I dont know if we have all of the facts to make this judgement. See CG64713 which gives Tax case etc. behind this thought
*I know guidance is not law but it is a good starting place.

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