Exit plan – move in before selling up to avoid CGT

I do not own a "prime residence" all my properties are potential rentals. I moved into most of my properties when I bought them and lived there as my only and prime residence until they were ready to let or for at least a few months whichever was the longest. I didn't want to get to my later years and have to move every few years so I got it out of the way and kept records early on. I realise that it is to late for some people to do this now but it is worth thinking about if you are younger and still buying.
The property that I live in is owned by my limited company - having transfered it after taking the tax relief - I pay tax on the benefit in kind but no rent and all my repairs are tax deductable through the company because the property is a rental. The company does not pay tax on the rent because I don't pay rent.

We have a holiday home bought many years ago we now want to move into this property after selling our home of 35 years, if we later want to down size further would we be liable to cgt?

@Pete, yes you will need to declare your gains but a good accountant should be able to help you minimise the tax. See Neil Barlows post above

If you wish to change your PPR you have to notify HMRC within 2 years of a PURCHASE. Continually downsizing may not work, if HMRC finds out you had a lettings business. What is now being called aggressive tax avoidance.

Thanks for the excellent article. I still have questions though as I am in a fairly unusual situation it seems. My brother and I bought a house together, neither of us own any other property. We spent ~3 months refurbishing the property, no council tax was paid as it was unoccupied. After the refurbishments the property was let for ~3 years and the council tax was paid by the tenants. So now someone has asked if we would sell the house and we stand to make a capital gain of ~£60k. Do we qualify for any relief as it is? Or how long will we have to live in the property now to qualify for relief? We’ve both been renting elsewhere for the last 3 years. I understand the rules are to tax gains made through selling second homes, but the rules are currently looking likely to penalise us. Many thanks in advance

Hi Will

It seems you have made a £30,000 gain each. You each have an annual CGT exeption of £10,900 each so you will pay CGT of the balance of £19,200 at a rate of either 18% or 28%.

Are you and your brother married?

If you are then you could add your wives onto the deeds on the day of completion and use their £10,900 of CGT annual exemptions too.

Please take professional advice from a qualified accountant and solicitor before you do this. Note that some accountants and solicitors are unaware of this strategy to reduce CGT so if you get stuck let me know and I will be pleased to introduce you to the right people.

With the investigative side of HMRC does anyone know exactly how they can prove intentions? I have been gifted a property, which I have converted, the property was for me and my partner, (unmarried) who has just this week got a job on the other side of the country. Whilst doing the conversion for a year we haven't exactly loved the area its in, and really I'm thinking of not staying here alone. Its the only property I have ever owned, and I will live here for 6 months at least, but will move if his job becomes permanent; would I qualify for ppr relief, or would it just be easier to pay the CGT on the 200k gain? I have never developed a property previously, though I'm concerned this appears like a development. Can anyone suggest anything?

Good morning,
We are planning to buy our buy to let flat. We bought it in 2002 for 120,00 pouns and are planning to sell for 240,000 pounds in 2014. Do we have to pay CGT? Thank you.

Hi Nadette

When you say you are planning to buy, did you mean to say that you are planning to sell?

If so, you have made a £120,000 Capital Gain which will be taxable if you are selling the property to anybody other than a spouse or Civil Partner.

The rate of tax payable is likely to be 28% based on this level of gain. There are personal annual CGT allowances which can be utilised to reduce the tax burden and there may be other opportunities available to you to reduce the tax such as adding spouses to the deeds immediately prior to completion. I recommend you to take professional tax advice in this matter. If you visit the link below and complete your details on the form I will refer you to the tax advisers who do all of the tax planning for me. It's not a free service but you can be certain that their advice will be 100% accurate as they are qualified accountants and their advice is insured. They will also be able to advise you the best ways to reduce your tax burden. The link is >>> http://www.property118.com/landlord-tax/

Reply to the comment left by "Mark Alexander" at "25/07/2013 - 08:32":

Thank you very much for your prompt reply. Are we allowed to deduct the allowance for each year since 2003 because in that case we would not have to pay CGT (the allowance for my husband and myself would be well over 100,000 pounds). Thank you