How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Sam Your Own Question

Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12769
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Type Your UK Tax Question Here...
Sam is online now
A new question is answered every 9 seconds

I am required to live in to do my job efficiently but to keep

Resolved Question:

I am required to live in to do my job efficiently but to keep ourselves in the housing market we have owned and rented out a small property, since 1996. We bought it for £57000 and in todays market its worth about £196000. I am alarmed about how much Capital Gains Tax I will have to pay since it is no long spread over the number of years that we have owned the property. We have never lived in it. Can we claim that this is our prime residence and avoid capital gains. If not can we live in it for a period of time and how long would this have to be?
Submitted: 8 months ago.
Category: UK Tax
Expert:  Sam replied 8 months ago.

Hi

 

Thanks for your question

 

I am afraid as you have never lived in this property then the full gain will be liable to tax (in contrast to the fact that had you lived here, then all the gain would be exempt) and furthermore there did not seem to be an intent - at the time of purchase to ever make this your main residence. So this is a requirement for private residence relief to be considered for the duration of the time of ownership, and the fact you now plan to sell, makes this whole ownership period, and your statement - "keep ourselves in the housing market we have owned and rented out a small property"

So to suggest otherwise would be picked up and scrutinised by HMRC and disallowed.

And along with this consideration there also would have needed to be an intent to return to live in the property (which I appreciate does seem something you are willing to do) however, you fail at the first hurdle to allow private residence relief to exist.

 

Your next point is making an election to have this treated as your main residence, however any election for this would have to have been made within 2 years of purchase, during which time this had actually been your residence.

An election now, after all this time could only be made with a new purchase (which would allow a new election to be considered on the existing or new property.

So this is not an option, I am sorry to say.

 

At this stage - moving into this property will better your position, as it will allow the time you actually live in the property to be considered (make sure that you move all aspects of your live there - so change bank accounts with this address, and all other major aspects of you life such as driving licence, doctors, dentist, mobile phone contracts etc plus this will allow the award of private lettings relief, as it has then been your main residence and let out - with rents declared to HMRC.

Private lettings relief can allow up to, a maximum of £40,000 further tax relief for each of you.

Plus you both have your annual exemption allowance which allows a further £10,600 each exemption.

 

There is no set time limit that this has to become your main residence, HMRC allow any period of time as long as it is of a qualitative nature (so as indicated above, ALL aspects of your life are conducted from this property)

 

You advise that the property ownership split is 95% your wife and 5% you (or is that 90% wife and 10% you ?) - have you made this election with HMRC, with evidence to support this factor, because otherwise HMRC treat assets owned by married couples as 40/50 unless there is evidence to suggest otherwise. And if there is a mortgage on the property, I would assume that the lender also recognises this as a 50/50 split? Please advise if you have this different split election in place.

 

Let me have your response, to see what (if any) reliefs can be given

 

Thanks

 

Sam

 

 

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12769
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
Sam and 4 other UK Tax Specialists are ready to help you
Customer: replied 8 months ago.


Dear XXXXX, Thank you for your help, but I am not clear of the best course of action. I wish to retire at the end of August 2014 but according to my calculations the Capital Gains Tax that I would owe would significantly affect what we can buy to live in. We have always been clear that this was an asset to keep up with the housing market and at the time of purchase the system spread gains over the number of years of ownership. The mortgage company and the Tax office are both aware that the property is 95% in her name and 5% in mine. We did this because I am a higher rate tax payer and my wife pays a lower rate.


 


At present we have tenants in the property and the idea was to serve them notice of two months and then my wife would move in to assist with the sale of the property in the spring. We are trying to sell two other properties this financial year but these will incur very little Capital Gains since these were fairly recent purchases. I would be grateful if you could advise as to how we could make this work.


 


A ray of hope seemed to be this £40, 000 tax relief but I have no idea whether we qualify or how we go about claiming this. Please advise.


At present I am subtracting the purchase price from the proposed selling price, proportioning the profits between us and then subtracting £10,600 from each and multiplying by 18% in my wife's case and 28% in mine.


 


I am not out to evade tax but I feel that I would not have been in this position if I had not been required to live in to do my job efficiently.


 


Could you please advise on the best way to carry this forward.


 


yours sincerely Peter

Expert:  Sam replied 8 months ago.
HI Peter

Thanks for the accept.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
< Last | Next >
  • http://ww2.justanswer.com/uploads/baktax/2009-7-15_202414_Frame.jpg Andrew Baker(baktax)'s Avatar

    Andrew Baker(baktax)

    Personal Tax Adviser

    Satisfied Customers:

    756
    35+ years experience in income tax, CGT, non-residence
  • http://ww2.justanswer.com/uploads/teap007/2009-01-10_145815_bill_justanswer_for_profile.jpg TEAP007's Avatar

    TEAP007

    Tax Preparer

    Satisfied Customers:

    754
    Fully Trained Inspector of Taxes / District Inspector/ Team Leader/ Offshore Consultant/ 41 years
  • http://ww2.justanswer.com/uploads/BE/berduchwal/2011-6-7_84817_pict0854.64x64.jpg berduchwal's Avatar

    berduchwal

    Accountant

    Satisfied Customers:

    669
    Qualified accountant and bookkeeper running my own practice since 2008.
  • http://ww2.justanswer.com/uploads/JO/Josh2010/2012-4-29_19490_GettyImages80121770B.64x64.jpg Joshua's Avatar

    Joshua

    Lawyer

    Satisfied Customers:

    61
    LL.B (Hons), Higher Prof. Dip. Law & Practice
  • http://ww2.justanswer.com/uploads/RO/Ronaann/2012-3-19_23343_SSL22629.64x64.JPG Mrs-Tax's Avatar

    Mrs-Tax

    Tax Adviser

    Satisfied Customers:

    59
    Law Degree, 19 years in UK Tax.
  • http://ww2.justanswer.com/uploads/TG/TGraham12/2012-7-17_81212_bigstockBusinessHandshake508163.64x64.jpg Thomas's Avatar

    Thomas

    Solicitor

    Satisfied Customers:

    48
    Exposure to general tax issues
  • http://ww2.justanswer.com/uploads/struppiaml/2009-10-9_95150_anthony_business_002.jpg AnthonyL's Avatar

    AnthonyL

    Tax Adviser

    Satisfied Customers:

    19
    ATT, ATII, 12 years tax experience