Capital Gains Tax...

[Mulberry View]

Any CGT experts in these parts?

 

A friend of mine is in the RAF. They own a house, but he took a posting to another base about 2 years ago, where they've been living in subsidised RAF accommodation. Their house has been rented since, the same tenant has been there from the start. The tenant is now interested in buying the house. My friend would like to sell the house to the tenant, but they do not need to buy anything yet as they are still in RAF digs and are likely to be for the forseeable.

 

Are they likely to have to pay CGT if they sell and do not buy another property? From what I read, it's the fact that the house has been rented that puts mud in the water.

 

They'd ideally like to bank the money and look out for a building plot at their own pace.

[nod]

As long as it is there main residence 

No CG tax

So it should be the same as if he had sold his house and decided to live in rented 

[bassanclan]

It is not their main residence!

 

Their main residence is their RAF house.

CGT will be payable, but only if the gain is more than £12300 (or £24600) if co-owned.

If they have owned it for many years and used it as their main residence then the gain in those years would be CGT free.

 

Also their PPR extends for the final 9months of ownership, so they are only looking at the gain in 15 months

Edited December 29, 2021 by bassanclan

[ProDave]

It is CGT exempt for all the time they lived in it as their main residence, and the last 9 months of ownership regardless.

 

So they will be liable for CGT for the period it was let, less 9 months.

 

Hmrc take the purchase price and sale price and assume linear growth throughout the ownership, no good saying "but house prices fell that year"

 

If is jointly owned, you will each be liable for half the CGT.  and before you pay anything you each have your personal CGT allowance to use up.  So if it has only been let a couple of years it might well be the gain is below the joint cgt threshold and there is nothing to pay.

[Jilly]

Another option might be to consider (re)mortgaging it to raise cash, leave a tenant there, paying the mortgage, so that long term they end up with two properties. 

Edited December 29, 2021 by Jilly

[ProDave]

25 minutes ago, Jilly said:

Another option might be to consider (re)mortgaging it to raise cash, leave a tenant there, paying the mortgage, so that long term they end up with two properties. 

That is what we have done but eventually (the sooner the better) the spare house will need to be sold to become part of the retirement pot. That has just deferred (and increased) the CGT bill that will eventually have to be paid.

[Temp]

 

7 hours ago, Mulberry View said:

A friend of mine is in the RAF. They own a house, but he took a posting to another base about 2 years ago, where they've been living in subsidised RAF accommodation.

 

Seek professional advice..  There is something called the Armed Forces Exemption but I'm not familiar with all the details. 

 

https://www.litrg.org.uk/tax-guides/savers-property-owners-and-other-tax-issues/capital-gains-tax/selling-your-home

  

Armed forces – living in service accommodation

Service accommodation normally qualifies as ‘job-related accommodation’. From 6 April 2020, this treatment was extended to the case where you receive an armed forces accommodation allowance towards the cost of accommodation which may be rented in the private rental sector (as opposed to accommodation which is provided directly by the Ministry of Defence).

These rules, together with the other rules on absences, mean that members of the armed services absent from home due to armed service-related activities will probably not have to pay CGT on disposal of their home.

 

 

 

 

[Temp]

Google also found this but again Ive no experience of the provisions mentioned..

 

https://www.accountingweb.co.uk/any-answers/cgt-liability-for-armed-forces-personnel-without-o

 

 

Q: CGT liability for Armed Forces personnel without occupation of property

 

 

Good morning all,

I am in the Forces and I bought a property in 2006 with a view to move to a bigger house than the quarter we were living in at that time.  This was in preparation of a future assignment. However, the assignment changed and I was posted to Germany and I never got to live in the house. So we rented the house and left. After 6 years in Germany, I got posted back to the UK but not close enough to occupy the house so we have lived in the married quarters until now. Now that I am almost out of the Army, I want to sell the house to buy somewhere else to settle. My question is, if I make a profit from the sale which I will, am I liable for CGT? I have read a lot on this which has confused me a bit and some clear points from experts here will help me a lot. I do plan to contact HMRC for some guidance.  I have jointly owned this house with my wife and the mortgage is a home owner one as intended but cleared with the provider to rent the property due to said circumstances.

Thank you in advance.

Rob

 

One reply says...

 

 

A member of the armed forces can generally claim exemption from CGT under S222(8) TCGA 1992. Strictly an election should have been made within two years of the house being bought but a late election can be made under ESC D21. Sounds like this was the only house you ever owned so exemption from CGT shouldn't be a problem assuming you've always been provided with job related accommodation.

The exemption also applies to your wife or civil partner assuming that they've never had an interest in any other property.

 

 

 

[Temp]

Gosh I hate the text editor on the forum. It won't let me fix the bad formatting above. The missing reply to the above question says..

 

A member of the armed forces can generally claim exemption from CGT under S222(8) TCGA 1992. Strictly an election should have been made within two years of the house being bought but a late election can be made under ESC D21. Sounds like this was the only house you ever owned so exemption from CGT shouldn't be a problem assuming you've always been provided with job related accommodation.

The exemption also applies to your wife or civil partner assuming that they've never had an interest in any other property.