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bigduckontax, Accountant
Category: Tax
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In Oct 2011 my wife and I purchased a house in Weymouth. For

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In Oct 2011 my wife and I purchased a house in Weymouth. For the first 26 months we lived in it and renovated it. In Dec 2013 we moved into rented accommodation and started letting the house as an FHL. This continues for the next 24 months. In Nov 2015 we stopped letting it and moved back into the property. At all times this was the only property we actually owned. In Jan 2017 we sold the property and moved. We are advised we will have to pay CGT because we used it as an FHL. However, as it was our sole residence for 52 months of the 76 months that we owned it and it was used as an FHL for only 24 months, over what period is the CGT calculated? The time it qualified as an FHL or the whole time we owned it? If its the former, how is a value arrived at for the start and end points of the letting period in order to calculate the gain?

Hello, I am Keith, one of the experts on Juat Answer, and pleased to be able to help you with your question:

You will be liable to Capital Gains Tax (CGT), but only for the period the property was let out. For the rest Private Residence Relief (PRR) will apply as it was your sole or main domestic residence. Your total ownership time is 63 months. Your let time is 24 months so 24 / 63 say 38% of any gain will be exposed to CGT which will be levied at 18% or 28% or a combination of the two rates depending on the individuals' income including the gain in the 16/17 tax year. Half of the gain each will be subject to tax and you both have an Annual Exempt Amount (AEA) of 11,3K and Lettings Relief (LR) up to 40K to offset this. If the movement was to job related accommodation my answer may require aplification.

I do hope that you have found my reply of assistance.

Customer: replied 5 months ago.
Many thanks - would we not get Entrepreneurs Relief and therefore pay at 10%?

No, property letting does not constitute a business for entitlement to Entrepreneurs' Relief (ER). You could always try it on, but I doubt it would get through HMRC's filters!

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