CGT or PPR – should we move back in?

WE have owned a house for 30 years and it has been rented by tenants for the last 5 years. Property was purchased for around £60k and is currently worth around £500k.

The implications of the proposed changes to CGT in 2020 would leave us with a large tax bill.

How would the CGT liability be affected if we were to move back into the house as our prime residence?

Many thanks

Colin

Editors Note:

HMRC: CGT Calculator >> https://www.gov.uk/tax-sell-property/work-out-your-gain

Total gain (£) x (Period of occupation/Total period of ownership)

Calculate the time you have owned the property and the time you have lived there as a main home plus 18 months.

From .Gov PPR relief >> https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017–2

1. How the relief works

If you dispose of:

• a dwelling house (which can include a house, flat, houseboat or fixed caravan) which is your home
• part of a dwelling house which is your home
• part of the garden attached to your home you would normally have to pay Capital Gains Tax on any gain you make

However, you’ll 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’
• you’ve not been absent, other than for an allowed period of absence or because you’ve 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’
• no part of your home has been used exclusively for business purposes during your period of ownership

The ‘Definition of terms’ are explained below. If you meet all of these conditions, you won’t have to pay Capital Gains Tax on the disposal. You won’t need to complete the Capital Gains Tax summary pages of your tax return if you’ve made no other disposals or chargeable gains and don’t wish to make any capital gains claims or elections. (See page TRG 5 of the tax return guide)

If not all of the conditions are met, you may still get partial relief under certain circumstances and you’ll need to complete the Capital Gains Tax summary pages of your tax return. This helpsheet describes the circumstances when you may get relief and explains how much relief you can deduct from any gain to calculate the chargeable gain.

Even if you meet all of these conditions, you won’t get Private Residence Relief if:

• you dispose of all or part of your garden after you’ve disposed of your home
• you acquire a dwelling house and/or spend money on it in order to realise a gain on its disposal

For example, you may have bought the house to sell it quickly at a profit or, if you were a tenant, you may have bought out the freehold in order to increase your profit on sale. In this case, you’ll need to provide details on your tax return.

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