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bigduckontax, Accountant
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I own a family home in Newcastle but have worked in London

Customer Question

I own a family home in Newcastle but have worked in London for 9 years. We bought a flat in joint names but I have lived in the flat 5 nights a week for 9 years. I am on the electrol roll in London and all my HMRC correspondance comes to the London address. The flat was bought for £205k with a morgage of £180k. I am considering selling for £260k and buying another flat in Essex for £200k. Will I have a CGT libility if I do this ?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.

Unfortunately, you will! If this had been the family home you were disposing of then the requirement to live away would have been in your favour, but you aren't so that's out!

For CGT purposes the mortgage is irrelevant. You will have a capital gain of 55K, but remember that your buying costs including stamp duty inflate the purchase price and the selling costs reduces the sale price. If you have not factored these in then your gain may well reduce. You have an annual allowance of 11.1K so on your figures you will have a taxable gain of some 44K. This will be taxed at 18% or 18% or a combination of the two depending on your overall income for the year.

You are not entitled to any roll over relief on this transaction and the whole Capital Gains Tax (CGT) process starts all over again. Remember that within 2 years of your new purchase you can elect which of your dwellings you wish to have as your Principal Private Residence for CGT purposes. If you do not make such election HMRC will base the decision on the facts of the case which in your case is likely to be the southern location.
Customer: replied 2 years ago.

Thanks Keith - Why then would HMRC in deciding the facts of the case on the current London flat not decide it is my principal private residence ?

Expert:  bigduckontax replied 2 years ago.
I very much doubt if they would not decide your London London residence in view of the time you spend there.
Customer: replied 2 years ago.


Thanks Keith so on that basis - if they take that view I will not get caught by the CGT on this sale so I shouldnt declare it ? Last question honestly and I will rate you as excellent


 


Kind Regards


 


Iain

Expert:  bigduckontax replied 2 years ago.
Iain

You should declare your gain on your annual self assessment return. Failure so to do could get you into considerable hot water. The penalty can be up to 75% of the tax owing, ouch!

The Private Residence Relief should be given automatically by HMRC.

Regards

Keith
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3379
Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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