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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am married (16 yrs). The marital home is in my husband's

Customer Question

Hi I am married (16 yrs). The marital home is in my husband's name (always has been). Approx 4 years ago I bought a property (flat next door) in my name as an investment (much work required). We subsequently had a loft conversation undertaken in our marital home and ended up moving next door for a year while the building work was carried out. We moved back to our home in June last year. I am currently selling the flat next door. As we lived there for a year (documented by Council Tax) less than 18 months ago, does this mean I could avoid paying Capital Gains Tax on the profit from the sale?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

Can you tell me exactly when you bought the flat, what use it was put to before you moved in and exactly when you moved into it and then out of it please. Did you do any work on the flat?
Customer: replied 2 years ago.

Hi, bought flat June 2011. Had among other problems dry rot and damp which was remedied. Flat was empty until we moved in while renovation of our own home (loft conversion) was undertaken. Intention upon buying the property was to do remedial work and then hold on to until local market no longer stagnant/house prices in this area increased then sell. Moved in June 2013 and moved out June 2014 (registered with Council Tax as living there for the entire period).

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Customer: replied 2 years ago.

Would you be able to get back to me this afternoon?

Expert:  TonyTax replied 2 years ago.

Given that your intention was to refurbish the flat and sell it at a profit, the gain or profit should be taxable with no deduction for main residence relief in my opinion. It was never your intention to make the flat your home as it was just a convenient place to stay while work was done on your other property. That will almost certainly be the HMRC view if the become aware of the facts.

On the other hand, you might argue that you had to have somewhere to live whilst work was being carried out on your other home. At best you would get the period from June 2013 to June 2014 as a tax free period, together with the last 18 months of ownership (previously 36 months), excluding overlaps. Take a look at HS283 for more information on how to calculate the gain.

If it were me, I'd probably not claim any relief as it was always my intention to make a refurbishment profit from the property and never to be my main home. I do know that many people would take the chance and claim main residence relief. HMRC may charge you to income tax and NIC on the profit as a property developer as opposed to CGT, though four years is a long time to refurbish and sell a property so you may be able to pay CGT. The fact that it appears not to have been let won't help you. HMRC may ask what the reason for the purchase was.

If you do claim some main residence relief it may impact on the tax position of the other property if and when you sell it.

I hope this helps but let me know if you have any further questions.

TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15841
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

many thanks

Expert:  TonyTax replied 2 years ago.
Thanks and good luck.

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