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taxadvisor.uk, Chartered Certified Accountant
Category: Tax
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Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I am building a additional new property on my land. We live

Resolved Question:

I am building a additional new property on my land.
We live in the existing building which will remain as is.
We live in the existing building ( main home)
I am a higher rate tax payer.
Questions:
1. If I sell the new property am I liable to capital gains tax.
2. I we live in the new building and sell our existing home are we liable to capital gains.
3. If my son who lives with us moves into the new property are we still liable to capital gains.
4. If both buildings are not sold immediately building works finish but are lived in by us, is their a number of years, will tax still be payable.
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

[Q]
1. If I sell the new property am I liable to capital gains tax.

[a]
You will be liable to income tax and NI Class 4 and not capital gains tax if you build a new property and then sell it. HMRC would view this as activity of a property developer and not property investor.

[Q]
2. I we live in the new building and sell our existing home are we liable to capital gains.

[a]
If you were to move to the new building and make it your only and main residence and sell your existing home, any gain from sale of existing home would be exempt from capital gains tax as it would be covered by private residence relief.

[Q]
3. If my son who lives with us moves into the new property are we still liable to capital gains.

[a]
Basically, you are liable to capital gains tax on any chargeable gain and gain from sale of this property being a second home would give rise to CG, irrespective of the fact your sons would be living in it...

[Q]
4. If both buildings are not sold immediately building works finish but are lived in by us, is their a number of years, will tax still be payable.

[a]
If you moved from your current dwelling to the new property and made it your main residence and notified HMRC within two years of completion that the new property is your main residence then all the period it remains your main residence your gain would be covered by private residence relief. If you were to sell your present residence within 18 months of moving out, then the whole gain on your present residence would also be exempt from capital gains tax.

More information on private residence relief can be found here

http://www.hmrc.gov.uk/helpsheets/hs283.pdf


I hope this is helpful and answers your question.

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Customer: replied 2 years ago.

Just to clarify.

I move from my existing building into the new building, sell the existing building then no capital gains are due.

I live in the new building for 18 months and then sell and move again no capital gains tax.

Expert:  taxadvisor.uk replied 2 years ago.

Les, thanks for your reply.

[Q]
I move from my existing building into the new building, sell the existing building then no capital gains are due.

[a]
correct ... no capital gains tax as gain would be exempt from cgt

[Q]
I live in the new building for 18 months and then sell and move again no capital gains tax.

[a]
18 month period is additional relief available whether you live in the property or not provided it has been your main residence at some point during the period of ownership. You have to make it your main residence for that time and regard your main home as your secondary property to qualify (assuming you retain both).

I hope this is helpful.

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