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Sam, Accountant
Category: Tax
Satisfied Customers: 14166
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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I Would like clarification on the change to Private residents

Customer Question

I Would like clarification on the change to Private residents relief in light of my circumstances.

I bought a flat in April 2000, I lived in it fro a bout 2 years and rented it out until 2008 which is when i moved into the property again and added my wife to the mortgae,we then moved out of london and into rented accomadation for four years,we stopped renting the property in 2013 and moved out of our rented property, and it has became our home again.

we are now on selling the property, and as i understand myself an my wife would be due 3 years each PRR, however I have been told that this will be halved due to a change in legislation,to just 18 months each, and that i would not be able to take the time i lived into the property into consideration aswell.
Submitted: 4 years ago.
Category: Tax
Expert:  bigduckontax replied 4 years ago.
Hello, I'm Keith and happy to help you with your question.

You are getting things a trifle mixed. Up to 5 April 2014 the last 3 years of ownership was ignored for Capital Gains Tax (CGT) purposes. Forom 6 April 2014 this is reduced to 18 months.

To determine your CGT position you work out the number of months of ownership. Then you calculate the number of months of occupation by you. To the occupation months you add 18 or 36 months depending upon the sale date, after all 5 April approaches quickly. Add to this any period when your employment necessitated you living elsewhere. This [occupation over ownership] gives you the proportion of your gain subject to CGT. With luck, like the lift, it is going down!

All is not lost, however as a relief called Letting Relief is available up to 40K. You should look at the HMRC web page 'Capital Gains Tax relief on your own home.'

The gain will have to be adjusted also to allow for your wife's participation, splitting the property 50/50 from the date of the split at the current market value. On sale you both will have the reliefs I mention, proportionally. In fact your computations may need you to employ a local, trusted accountant or solicitor to unscramble the situation. It isn't a mess, just a bit complex.

I do hope I have been able to throw some light on your position. You might well avoid CGT altogether, certainly minimise its effect, but without full data one can never be quite sure.
Customer: replied 4 years ago.
Hi to clarify then I woul gain more private residents relief if I sold prior to April 5th 2014 ?
Expert:  bigduckontax replied 4 years ago.
Correct, your occupation proportion would be inflated by 18 months, but you need to look slippy, there are but 14 working days to go, so get your skates on! You could make a Land Registry transfer, of course, very quick and cheap, but fraught with danger for the buyer. I've only used it once to transfer a bit of property from one company to another within a company group.
Customer: replied 4 years ago.
I've read that it would be possible to do a exchange of contracts with a delayed completion ? Is that similar to the land registry transfer ?
Expert:  bigduckontax replied 4 years ago.
No completely different. A Land Registry Transfer is done on one form, payment of a fee [GBP 40 when we did it over 20 years ago now] and that's it. No searches, checks on validity of title etc. That's why it's so dangerous to the buyer. He could get the proverbial pig in the poke!

Exchange of contracts with delayed completion is way round the problem. As we all know if you buy and fail to insure in the period between exchange and completion and the house burns down the vendor can still insist on the sale and his money, ouch!

Expert:  Sam replied 4 years ago.



I wish to offer a different perspective - first your wife will be treated as having owned the property from the purchase date - as this was both your main residence when you made the transfer.


Second - the additional private residence relief of 36 months (if the property is sold before 05/04/2014) or 18 months (if sold after 05/04/2014) only gets awarded when you sell a property that is NO LONGER your main residence, and you indicate that this is your current home, so unless you move out and then sell, will you even need to worry about the additional relief being 36 months or 18 months in additional to the actual time you lived there.


Thirdly - the Private lettings relief element due, is awarded to you both - but just for the period when the property was let (so is time apportioned to reflect the catual time you had tenants and of course is on the expectation that all rents were declared to HMRC)

Then we have the period of time when you could not occupy the property due to you moving for work in London - this period MAY qualify for private residence relief too. Plus when all reliefs and other deductions are made (so costs to buy and sell such as legal and estate agent fees and stamp duty and the costs of any major improvements ( for example such as new kitchen, conservatory, new roof etc) then you STILL have the first £10,900 EACH exempt (this increases to £11,100 after 05/04/2014 and is your annual exemption allowance awarded in the year of sale)


So you may have very little capital gains at all.


I hope you do not mind me offering these additional savings and information, but at least you are then clear on the full position. And if you wish an estimated calculation to be made then do feel free to ask another question on Just Answer, and you can always ask for me Sam Tax in your opening post if you would prefer, and the other experts will leave it for me to answer. (I'm online every day)



Thanks Sam