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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4072
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Hi, bought UK property for £131,500 29/03/1999. This was main

Customer Question

Hi, bought UK property for £131,500 29/03/1999. This was main residence until 31/01/2005, we then moved to Spain. As husbands business was in the UK we didn't rent out the property as a whole but did holiday lettings instead. So was rented and still a main residence in the UK. It wasn't until November 2011 that we rented out in full. Can you class the period from Jan 05 to November 11 your primary residence (in the UK) as husband stayed there a lot thought out this period but was holiday let sometimes? If it can be classed as primary residence still then we would have no UK CGT as sale was within 3 year period from Nov 11?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.
Right, firstly you are a trifle out of date as the 3 year rule was reduced to 18 months this year. You are deemed to have resided in your house even it you did not.
Yes, I feel your UK house could be classed as your sole or main domestic residence, but you may have a fight on your hands with HMRC. I assume you were declaring the rent income for Income Tax.
So on to CGT; work in out in months; you owned for 185 months. You let for 34 months. Thus 34/185 some 18% of your capital gain is liable to GCT. Take the purchase price plus costs, add any improvements, new kitchen, installation of central heating, double glazing etc to derive a acquisition price. Take the sale price less the cost of sales and the difference is the gain. Multiply that by (34-18)/185 [some 7%] gives the gain liable to CGT. There is the probability of Lettings Relief of up to 40K and we may be approaching a position that there is no gain left to tax. If there is tax is levied at 18% or 28% or a combination of the two rates depending on your income plus the gain in the year of sale. That quick canter assumes you sell this month.
Your holiday lettings can be advantageous as losses made on such lettings are allowable against all other income, not just the proprty letting income stream. However, to be classed as a holiday met HMRC have the following advice:
'For the period explained in the next paragraph (normally the tax year) the property must be:
Available for holiday letting to the public on a commercial basis for 140 days or more, and
Let commercially for 70 days or more, and
Not occupied for more than 31 days by the same person in any period of 7 months.
T
he period to be considered for the above tests is:
In a continuing period of holiday letting: the tax year ended 5 April, or
In the first year of letting: the twelve months starting with the date of the first letting,
In the final year of letting: the twelve months ending with the date of the last letting.'
It is possible that this matter may not concern you at all, but your question does not make me privvy to all the detail.
I do hope I have helped you with your conundrum.
Customer: replied 3 years ago.

Is there legislation about the period whilst holiday lettings so can use an argument should it be questioned. Yes it met all the holiday lettings criteria and was dealt with annual on our tax returns each year. Any losses were used up against other income.

Expert:  bigduckontax replied 3 years ago.
No, the holiday lettings caper is a special concession which allows losses to be offset against any income. The only problem I see is the possibility of HMRC not being very happy with the residence plus holiday lettings and trying to extend the rental periods and hence increase the ratio of the gain liable to CGT. I think you would be well advised to retain a local, trusted and experienced professional to negotiate with HMRC in this matter when you sell.
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 3 years ago.
Thank you for your support.