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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4959
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We purchase our family home ParkHouse in 2002 for £96,000 We

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We purchase our family home ParkHouse in 2002 for £96,000
We did a lot of work to it and in 2012 it was valued at £385,000 – we wanted to move and put the house on the market for sale.
We bought a piece of land 2012 and lived onsite in a mobile home building a new life & business and getting planning permission and re-mortgaged ParkHouse to help fund some of it. In 2013 we got planning and in 2015 we have now started the new build of our home on the land we have been living on.
Our original home ParkHouse was for sale for over 2 years with no suitable offers so April 2015 it was taken off the market and rented out for 6 months, it is now empty again and we are considering what to do whether to put it for sale or rent it out.
Can you advise the tax implications, have we lost the benefit of selling it as our home and avoiding capital gains.
If we build and move into our new home and sell Richmond at some point could we be in danger of a huge tax bill.
The mortgage on ParkHouse is £287,750 – if we sold it how would any tax liability be worked out, in all likelihood any sale price would be nearer £300,000.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. Firstly forget all about mortgages, they do not come into the Capital Gains Tax (CGT) computation at all. However, the interest element of the mortgage is allowable against the rental for the let period. Now, before I can move forward to CGT I need to know the cost of the work you did on your home; the value is, at this stage, irrelevant. I await your further instructions.
Customer: replied 2 years ago.

Hi Keith, we lived in and did up the house over a period of 10 years, no records or receipts kept as it was our home. We raised the mortgage twice to help fund the work/renovations from the initial £96,000

Yes, but by how much did you raise it?
Customer: replied 2 years ago.

Bought in 2002 for £96,000 - mortgage £86,000
Raised mortgage to £120,000 in 2003
Raised mortgage to £250,000 in 2012 - then put it on the market, mortgage raised was to help fund the new land purchase and home.

Raised mortgage to £288,750 in 2015 but money was for personal use.

I would incline to the opinion that Parkview remained your sole or main domestic residence throughout the whole upheaval save for the short time you let it out. Thus Private Residence Relief would apply which relieves Capital Gains Tax (CGT) at 100%.
However, on the assumption that this treatment proves unacceptable the following computation is appropriate. You are deemed to be in occupation for the last 18 months of ownership even if this is not the case. Your total ownership time is 156 months and the non occupation 36 adjusted to 18 so only 18/156 say 11.8% of the gain is taxable.
The gain is 300K [less costs of sale] - 96 - 24 = 180K that is 90K each. 90K @ 11.8 is say 10.6K gain, within the Annual Exempt Amount of 11.1K so there is no CGT to pay. Lettings Relief would also be available, but it looks as though you may not need this anyway.
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Thank you for your support.