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My ex-husband and I owned one house that we lived in, rented

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My ex-husband and I owned one house that we lived in, rented out and sold on 18.10.12 and did not pay CGT as it had been our main home. In the meantime I inherited a house in 8.9.11 which I lived in until it was rented out on 1.12.12. My tenants are moving out in June after 2.5 years, it has increased in value by 100,000. If I sell I am concerned about CGT. Does the very brief period between selling first house and renting second one out count as living in it for tax purposes. Should I move back in and if so for how long to satisfy tax office.
Another complication is that I may move permanently to Australia later this year so not sure if I would be treated as non-resident for tax and if different rules would apply.
Very complicated question, any help appreciated.
Thank you.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Did you move into the inherited property as soon as you assumed ownership? What was the probate value? Is the inherited property owned by you alone or jointly with your husband? If it is owned jointly, when was it put into joint names? Was the first house let when you moved into the inherited property?

Customer: replied 2 years ago.

I did move into it as soon a I assumed ownership, owned just by me. Probate value 250k, now 350k. The first house was let when I moved into the inherited property (until July 2012)

Expert:  TonyTax replied 2 years ago.
Thanks.

Leave this with me while I draft my answer.
Expert:  TonyTax replied 2 years ago.
Hi again.

You should refer to HS283 here for information on CGT and the main residence.

Let's assume the gain is £100,000. You can reduce that further by deducting legal fees, survey fees, stamp duty, selling agent fees etc. If you sell the property in September 2015 (say 3 months to sell), by that time you will have owned it for 47 months of which you will have lived in it for 13, let it for 31 and it will have been vacant for 3.

The gain for the period that you occupied the property will be exempt from CGT as will the gain for the last 18 months of ownership. That accounts for £65,957 (£100,000 / 47 x 31). The balance of the gain of £34,043 would normally be taxable but you let the property as well as having used it as your main home so it will be covered by letting relief of £34,043 (the lesser of £40,000, £65,957 and £34,043). There will be no CGT to pay.

The rules for non-residents who own UK residential property changed with effect from 6 April 2015 as you can read here. Under the new rules, the value of the property at 5 April 2015 can be used as the cost for CGT purposes. Up to 5 April 2015, a non-resident could sell a UK residential property and pay no CGT in the UK subject to some basic rules, one of which was not to return to the UK within 5 years (5 full tax years in some cases) of moving out of the UK if they had owned the property when they left the UK.

I cannot see that you will be able to use the 5 April 2015 value as your cost as you were not non-UK resident at 5 April 2015. Your best bet would be to sell before you leave the UK as, based on the figures you provided, there would be no CGT to pay.

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