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I thought it was too quiet

Interesting CGT proposal

This has just been dumped on me while still relaxing from Jan and I can't think staright

Client owns a large retail premises the upstairs of which has neve been used as residential

He has planning permission to build a large flat/house at the back and over the shop, which will shrink the shop by 50%.

He intends to move into the flat for a period of 12 months and a day and then sell it. He thinks he can get PPR and pay no CGT.

My reaction ( apart from horror at being disturbed) is that he has to value the property at the date the conversion is finished and any profit thereafter can gain PPR. However the profit gained at the end of the conversion would be liable to CGT in the usual way.

Who' s talking b******s him or me or both of us

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01st Feb 2019 14:59

Well if this is a current rental business, this might be
a commercial transaction, in the nature of trade of property development, nothing to do with CGT.

ie you would value the purchase price of the site from the existing business at a reasonable price PRIOR to the build, apply A/A+B for the cost, to compute the CGT for the existing business.

Then its the trade of property development.

if it is a CGT issue he wont get PPR for living there for 12 months, if his INTENTION is to convert and sell it.

Only if his intention is to move in with the wife and kids and live there long term would it more to a rental business.............most of the time they jsut pretend, everyone really lives in the normal house and HMRC would quosh it.

Context is all with these types of things.

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01st Feb 2019 15:29

Thanks Really
He operates a retail business from the shop and rents the house he currently lives in
Not sure how HMRC would establish intention. Unless they use the man on Clapham Omnibus approach

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to bernard michael
01st Feb 2019 15:49

intention is hard to prove, but in most of the cases in this area that get to tribunal so we know about it, the tax payer is demonstrated to not be looking like they intend to live in the property other than as a temporary measure.

The look quite deeply at this, ie correspondence addresses, where you live before after, utility consumption, you name it. There is one built entirely around the lack of furniture, and the fact the chap couldn't really afford to live there and had his washing done by his mum. This all builds a pattern as to whether there is a "degree of permanence" required by the legislation.

Given the sums involved, they seem to go for these, we have had a few enquiries in this area and its been a pain to establish where people lived over a (say) 10 year period.

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to bernard michael
01st Feb 2019 15:52

bernard michael wrote:

Not sure how HMRC would establish intention.

HMRC don't need to establish intention. You have told us what the client's intention is. S224(3) TCGA (assuming still extant) is presumably relevant to the facts.

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to Accountant A
01st Feb 2019 15:54

@ AA, well quite!

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01st Feb 2019 15:41

Why twelve months and a day ?

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to lionofludesch
01st Feb 2019 15:47

Section 187(1) of MDtP Act 1972.

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to Wanderer
01st Feb 2019 15:53

@wanderer, I think the point is there is no time limit on how long you have t0 live in the property for PPR relief to be established.

You could get PPR in 24 hours if you INTEND a property to be your main residence, but it ends up not being (say you lose your job on the day you move in, and have to move 200 miles away for a new one) or not get it in 2 years if you occupy in a temporary manner, eg whilst waiting for your main home to be rebuilt after a fire.

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to ireallyshouldknowthisbut
01st Feb 2019 15:56

ireallyshouldknowthisbut wrote:

@wanderer, I think the point is there is no time limit on how long you have t0 live in the property for PPR relief to be established.

Dunno why that was directed at me??
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to Wanderer
02nd Feb 2019 09:42

Wanderer wrote:

Dunno why that was directed at me??

Obiquity of your earlier post, probably.

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to lionofludesch
01st Feb 2019 15:47

lionofludesch wrote:

Why twelve months and a day ?

He's had his Steeleye Span album out again.

All around my hat I will wear the green willow
And all around my hat for a twelve month and a day
And if anyone should ask me the reason why I'm wearing it
It's all for my true love who's far, far away

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By DJKL
to Accountant A
02nd Feb 2019 12:04

All around my flat I will claim as main residence
And all around my flat for a twelve month and a day
And if anyone should ask me the reason why I'm claiming it
It's all for my tax bill that I don't want, to pay.

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to DJKL
02nd Feb 2019 12:16

DJKL wrote:

All around my flat I will claim as main residence
And all around my flat for a twelve month and a day
And if anyone should ask me the reason why I'm claiming it
It's all for my tax bill that I don't want, to pay.

Nice.

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By DJKL
to lionofludesch
02nd Feb 2019 12:42

Thanks for the kind word.

It does not scan correctly but is slightly better than a lot of my other attempts; a limited benchmark.

I can possibly include it in "Ditties for Accountants, Volume 1", to be released in 2020; available from all low quality retail outlets or it might be better in "The Accountant's Big Book of Humour", in which I can also include cartoons and steal vast amounts of stuff from "Any Answers" questions as additional material.

"Perfect Christmas present for all those who have the misfortune of having an accountant as their significant other" could be used as the marketing tagline.

And be assured, none of you will be forgotten in the dedication ,though you may well wish you had been.

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to DJKL
11th Feb 2019 14:43

You can't use my name!

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By DJKL
to The Accountant
11th Feb 2019 14:45

We will obviously need to discuss the division of the royalties; I will get my people to talk to your people.

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02nd Feb 2019 00:59

The way you've described it, I don't see PPR being an issue at all. It is not in point.

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02nd Feb 2019 10:33

Thanks everyone. Some useful pointers

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