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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3830
Experience:  FCCA FCMA CGMA ACIS
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I purchased a property as my home in 2002. I moved out of

Customer Question

I purchased a property as my home in 2002. I moved out of the property when I moved in with my ex partner in 2005 and let it to cover the interest only mortgage. I moved back into the property in 2010 for 9 months and re-let. I have substantially improved the property over the years spending approximately £40,000 on it. I purchased the property for £176,000 and split the title. I am now living in the bungalow that I built in the property's garden and wish to sell it in order to clear most of the mortgage I raised to build that property. The property has been let for the past 3.5 years. I have a mortgage on the property of £176,000 that comes to an end on the 16th September. I have had an offer to purchase the property for £266,000. Will I be liable for CGT. Thank you
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be ably to help you with your question. You say you split the property, with whom and in what proportions? Also, has the other party still an interest in the property? Once I have this information I can advise you further.
Customer: replied 1 year ago.
Sorry I obviously didn't explain myself very well.I purchased the property with a long garden. I split the title of the land and built a bungalow at the rear. I own both properties, subject to mortgages. I am living in the one I built and now I wish to sell the other one. Please let me know if you require any further information. Kind regards Toni
Expert:  bigduckontax replied 1 year ago.
Have a look at HMRC Helpsheet 283. The following rules are relevant:
'However, you will be entitled to full relief where all the following
conditions are met:
• the dwelling house has been your only or main residence throughout your
period of ownership, and
• you have not been absent, other than for an allowed period of absence or
because you have been living in job-related accommodation, during your
period of ownership
• the garden or grounds including the buildings on them are not greater than
the permitted area, and
• no part of your home has been used exclusively for business purposes
during your period of ownership'
Or to put in another way, if the site is below the permitted area (half a hectare) then you will escape Capital Gains Tax (CGT) on the transaction as Private Residence Relief (PRR) will apply and that relieves CGT at 100%.
You can find the helpsheet here:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

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