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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I bought and sold a 2nd home between 2005 & 2006, in 2007 I

Resolved Question:

I bought and sold a 2nd home between 2005 & 2006, in 2007 I bought another home with the profit from the first. ( I was advised by an accountant friend, that by doing so I would not have to pay CGT ) I pay tax through PAYE so did not declare to HMR&C. Should I have paid CGT?
I still own the house and use it as a holiday home.
Submitted: 4 years ago.
Category: Tax
Expert:  TonyTax replied 4 years ago.
Hi.

Were the properties that you have bought and sold purely for your use as opposed to for letting?
Customer: replied 4 years ago.


The 1st was not lived in but sold when improved, the 2nd is for use as a holiday home for me and kids.

Expert:  TonyTax replied 4 years ago.
Thanks.

You cannot rollover the gain form one property into the purchase of another to defer any CGT liability unless the properties concerned are business properties or furnished holiday letting properties.

If you buy a property that you live in for the entire period that you own it, any profit you make on its disposal will be exempt from tax. Where it was not lived in for the entire period of ownership, party of the gain may be taxable. Take a look at HS283 for more information on property and Capital Gains Tax.

If the first property was never lived in by you and was just bought, improved and sold at a profit, then you will be treated as trading by the tax office and the profit will be subject to income tax and national insurance contributions, especially if it was done in a short period of time.

Unless you made an election for the second home to be treated as your main home within two years of acquiring it, then any gains on its sale will be taxable in full I'm afraid.

I hope this helps but let me know if you have any further questions.
Customer: replied 4 years ago.


Can I pay retrospectively without penalty after all these years?

Expert:  TonyTax replied 4 years ago.
Have you had a letter from HMRC or are they still in the dark? What has prompted you to ask the question now?
Customer: replied 4 years ago.


On the BBC news this morning I heard that anyone who has sold a 2nd home in the last 20 years can pay the CGT by the end of the day to avoid penalty.

Expert:  TonyTax replied 4 years ago.
There are some notes on that here but you've found out about it a bit late. It would appear that you have until today to notify the tax office of the gain so will be struggling and until 6 September to pay the tax. Read the notes, check your eligibillity and call the advice line here for more information. If you are eligible, you may save yourself some money in terms of penalties.
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