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taxadvisor.uk, Chartered Certified Accountant
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My wife is from Israel. She bought a flat there (before moving

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My wife is from Israel. She bought a flat there (before moving to the UK) in 2002. In 2005 she came to the UK to do a masters degree. She then did a PhD. For the first three years after leaving Israel, a friend was house-sitting in her flat, looking after her cat and paying her a very substantially below market rent, essentially a maintenance payment. In 2008 she decided to let the flat out properly, and it has been let since.

She is considering selling the flat today, and wants to know how the UK tax liability would be calculated. Would the flat still be considered her primary residence while her friend was house-sitting, or would it be considered a second home / investment property from that point in time. Also, would her immigration status as a student for the first 5 years of her say here affect it?
Submitted: 3 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 3 years ago.
Hello and welcome to the site. Thank you for your question.

Please advise if the flat was your wife's main residence between 2002 and 2005 before she came to the UK?

Many thanks
Customer: replied 3 years ago.

Yes. It was.

Expert:  taxadvisor.uk replied 3 years ago.

Good morning to you and thank you for your reply.

Capital gains tax calculation – values are an example only

EXAMPLE WITHOUT DATES/ACTUAL GAIN

Main residence (2002-2005 3 years) = 36 months

Rented period (2005-2013 9 years) = 108 months

Total period of ownership (say 12 years) = 144 months

Capital gain say = £50,000

The property was your wife's main residence for 3 years before she moved to the UK. Her immigration status when she first moved to the UK is not relevant in these calculations.

Rental period would commence from 2005 when a friend was house-sitting in her flat.

Relief available

Private residence relief = 36 months

The final three years (36 months) always qualify for relief, even if you weren't living there, as long as it's been your only or main home at some point during the time that you've owned it.

Additional private residence relief = 36 months

Total period of ownership = 144 months

Capital gain = £50,000

Period covered by private residence relief (36+36) =72 months out of 144 months

72/144 x 50,000 = £25,000

Gain subject to CGT (50,000-25,000) = £25,000

Although the property has been let since 2005 to present date, because it was her main residence at some point, there is a further relief available called “letting relief”.

The maximum Letting Relief due is the lower of:

- £40,000
- £25,000 (the Private Residence Relief due)
-
£25,000 (the gain on the part of the property that's been let)

Letting relief = £25,000

Gain chargeable to CGT -Nil- as the gain is covered by letting relief.

I hope this is helpful and answers your question.


If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4717
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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Expert:  taxadvisor.uk replied 3 years ago.
Thank you for accepting my answer.
A feedback would be appreciated.

Best wishes

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