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Finances / Finanzen » uk.finance » Rollover relief on residential letting property
| Rollover relief on residential letting property [message #197658] |
Di, 01 Februar 2005 13:07 |
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Hi,
I own a second property which was purchased 3 years ago for =A3103k and
which has been rented out since then (assured shorthold tenancy). This
property is located about 100 miles from where I live. The decision to
buy there was based on the fact that I had family there at the time and
the property prices where much lower than were I live. Since then the
family has moved away and property prices have risen in that area. The
current tenant has decided to move on so now is a good time to move the
property closer to make it easier to manage. I've had some estate
agents around and they have valued it at =A3210k - =A3220k, so the
capital gain is substantial. Buying a similar property locally is still
going to cost more than the =A3220k mark so all the gain will be
reinvested.
I have been advised that rollover relief on capital gains does not
apply to privately owned property that is let on a residential basis.
If this is the case I would be faced with a crippling capital gains tax
bill. It would be more sensible to keep the existing property and
employ someone to manage it.
Can anyone shed any light on this for me? Is there any way I can avoid
capital gains if I sell up and reinvest?
Thanks in advance,
Nick.
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| Re: Rollover relief on residential letting property [message #197660 ] |
Di, 01 Februar 2005 14:47 |
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In message <1107259650.674243.60480 [at] f14g2000cwb.googlegroups.com>,
whatman [at] rmplc.co.uk writes
>Can anyone shed any light on this for me? Is there any way I can avoid
>capital gains if I sell up and reinvest?
Went into this in detail with my accountant a while ago, and the short
answer is no.
--
Richard Faulkner
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| Re: Rollover relief on residential letting property [message #197661 ] |
Di, 01 Februar 2005 14:52 |
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whatman [at] rmplc.co.uk wrote:
> Can anyone shed any light on this for me? Is there any way I can avoid
> capital gains if I sell up and reinvest?
AIUI the only way to avoid CGT on your investment property is to
make it your home prior to selling.
You can't, I think, do this by the PPR election mechanism since it's
more than 2 years since you bought or sold an eligible property, so
it would have to be on the facts. Unless you can afford to buy a
3rd property before selling the 2nd (and having all 3 in concurrent
actual use as your residences), or are willing to sell the 1st, you'd
have at least to give up use of the 1st as a residence, by properly
moving into the 2nd and preferably renting the 1st out for a while,
to give strong credence to your claim that the 2nd was in fact your
PPR by virtue of actually being your sole residence for a time.
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| Re: Rollover relief on residential letting property [message #197662 ] |
Di, 01 Februar 2005 14:55 |
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whatman [at] rmplc.co.uk wrote:
>so now is a good time to move the
>property closer to make it easier to manage.
Blimey, never seen this in the UK, seen it in N. America though !
>I have been advised that rollover relief on capital gains
I guess it depends exactly what you roll over.....
>does not
>apply to privately owned property that is let on a residential basis.
>If this is the case I would be faced with a crippling capital gains tax
>bill. It would be more sensible to keep the existing property and
>employ someone to manage it.
>
>Can anyone shed any light on this for me? Is there any way I can avoid
>capital gains if I sell up and reinvest?
Sorry, not much help, at a guess I'd say it's not available. Try IR150
and IR283. Links on my webpage
< URL:http://mysite.wanadoo-members.co.uk/quickhelp/property.h tm>
CGT on let houses is a FAQ -
< URL:http://groups.google.co.uk/groups?q=CGT+rented+group:uk. finance&hl=en&lr=&scoring=d>
Daytona
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| Re: Rollover relief on residential letting property [message #197665 ] |
Di, 01 Februar 2005 17:07 |
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"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:UQLLd.4430$8B3.2573 [at] text.news.blueyonder.co.uk...
> whatman [at] rmplc.co.uk wrote:
>
>> Can anyone shed any light on this for me? Is there any way I can avoid
>> capital gains if I sell up and reinvest?
>
> AIUI the only way to avoid CGT on your investment property is to
> make it your home prior to selling.
>
> You can't, I think, do this by the PPR election mechanism since it's
> more than 2 years since you bought or sold an eligible property, so
> it would have to be on the facts. Unless you can afford to buy a
> 3rd property before selling the 2nd (and having all 3 in concurrent
> actual use as your residences), or are willing to sell the 1st, you'd
> have at least to give up use of the 1st as a residence, by properly
> moving into the 2nd and preferably renting the 1st out for a while,
> to give strong credence to your claim that the 2nd was in fact your
> PPR by virtue of actually being your sole residence for a time.
>
You cannot nominate a tenanted property as a PPR, since it is incapable of
being your residence. Once it's empty is another matter, but one still has
to reside in it.
--
Doug Ramage
[Watch Spam Trap]
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| Re: Rollover relief on residential letting property [message #197667 ] |
Di, 01 Februar 2005 17:46 |
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Doug Ramage wrote:
>
> "Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
> news:UQLLd.4430$8B3.2573 [at] text.news.blueyonder.co.uk...
>> whatman [at] rmplc.co.uk wrote:
>>
>>> Can anyone shed any light on this for me? Is there any way I can avoid
>>> capital gains if I sell up and reinvest?
>>
>> AIUI the only way to avoid CGT on your investment property is to
>> make it your home prior to selling.
>>
>> You can't, I think, do this by the PPR election mechanism since it's
>> more than 2 years since you bought or sold an eligible property, so
>> it would have to be on the facts. Unless you can afford to buy a
>> 3rd property before selling the 2nd (and having all 3 in concurrent
>> actual use as your residences), or are willing to sell the 1st, you'd
>> have at least to give up use of the 1st as a residence, by properly
>> moving into the 2nd and preferably renting the 1st out for a while,
>> to give strong credence to your claim that the 2nd was in fact your
>> PPR by virtue of actually being your sole residence for a time.
>
> You cannot nominate a tenanted property as a PPR, since it is incapable of
> being your residence.
Exactly. I didn't suggest that he should.
> Once it's empty is another matter, but one still has to reside in it.
Isn't that what I said?
At the moment, the OP has two houses, A and B. He lives in A and rents
out B. He wishes to sell B and buy C. He could kick the tenant out of
B and make it a second home for himself. He could then make a PPR election
nominating B as his PPR, except that it's too late for that since it has
been more than 2 years since he bought B [unless the fact that kicking the
tenant out counts as a change to the set of properties available to him
as residences and that this would reset the 2-year clock -- does it? In
the above I assumed it does not, but am not sure that's correct.]
I suggested he move out of A and into B, and that in order to make it
absolutely clear that B will now be his sole residence, he should let
out A for a while, thus removing it from any possibility of being deemed
his PPR still.
This course of action would give PPR status to B, not by the election
path, but on the facts, and would thereby escape the 2-year rule, since
that only applies to elections.
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| Re: Rollover relief on residential letting property [message #197671 ] |
Di, 01 Februar 2005 18:33 |
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"Richard Faulkner" <richard [at] estate.demon.co.uk> wrote in message
news:vw8sV9Bgh4$BFwhn [at] estate.demon.co.uk...
> In message <1107259650.674243.60480 [at] f14g2000cwb.googlegroups.com>,
> whatman [at] rmplc.co.uk writes
>>Can anyone shed any light on this for me? Is there any way I can avoid
>>capital gains if I sell up and reinvest?
>
> Went into this in detail with my accountant a while ago, and the short
> answer is no.
That looks like the long answer to me :-)
(the short one consists of 2 letters)
tim
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| Re: Rollover relief on residential letting property [message #197692 ] |
Mi, 02 Februar 2005 10:47 |
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"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:nnOLd.4547$8B3.1660 [at] text.news.blueyonder.co.uk...
> Doug Ramage wrote:
>
>>
>> "Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
>> news:UQLLd.4430$8B3.2573 [at] text.news.blueyonder.co.uk...
>>> whatman [at] rmplc.co.uk wrote:
>>>
>>>> Can anyone shed any light on this for me? Is there any way I can avoid
>>>> capital gains if I sell up and reinvest?
>>>
>>> AIUI the only way to avoid CGT on your investment property is to
>>> make it your home prior to selling.
>>>
>>> You can't, I think, do this by the PPR election mechanism since it's
>>> more than 2 years since you bought or sold an eligible property, so
>>> it would have to be on the facts. Unless you can afford to buy a
>>> 3rd property before selling the 2nd (and having all 3 in concurrent
>>> actual use as your residences), or are willing to sell the 1st, you'd
>>> have at least to give up use of the 1st as a residence, by properly
>>> moving into the 2nd and preferably renting the 1st out for a while,
>>> to give strong credence to your claim that the 2nd was in fact your
>>> PPR by virtue of actually being your sole residence for a time.
>>
>> You cannot nominate a tenanted property as a PPR, since it is incapable
>> of
>> being your residence.
>
> Exactly. I didn't suggest that he should.
>
>> Once it's empty is another matter, but one still has to reside in it.
>
> Isn't that what I said?
>
> At the moment, the OP has two houses, A and B. He lives in A and rents
> out B. He wishes to sell B and buy C. He could kick the tenant out of
> B and make it a second home for himself. He could then make a PPR
> election
> nominating B as his PPR, except that it's too late for that since it has
> been more than 2 years since he bought B [unless the fact that kicking the
> tenant out counts as a change to the set of properties available to him
> as residences and that this would reset the 2-year clock -- does it? In
> the above I assumed it does not, but am not sure that's correct.]
>
> I suggested he move out of A and into B, and that in order to make it
> absolutely clear that B will now be his sole residence, he should let
> out A for a while, thus removing it from any possibility of being deemed
> his PPR still.
>
> This course of action would give PPR status to B, not by the election
> path, but on the facts, and would thereby escape the 2-year rule, since
> that only applies to elections.
>
IMO, the 2 year limit applies to acquisition of 2 (or more) * residences*,
not merely the ownership of 2 (or more ) properties.
--
Doug Ramage
[Watch Spam Trap]
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| Re: Rollover relief on residential letting property [message #197693 ] |
Mi, 02 Februar 2005 10:47 |
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Doug Ramage wrote:
> IMO, the 2 year limit applies to acquisition of 2 (or more) * residences*,
> not merely the ownership of 2 (or more ) properties.
So are you saying that when he stops letting property B and starts using
it as a residence, this would count as an "acquisition" and re-start the
clock, thus making it eligible for PPR nomination, even though he acquired
ownership of it 3 years ago?
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| Re: Rollover relief on residential letting property [message #197901 ] |
Do, 03 Februar 2005 10:07 |
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"Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
news:Ly1Md.5293$8B3.4653 [at] text.news.blueyonder.co.uk...
> Doug Ramage wrote:
>
>> IMO, the 2 year limit applies to acquisition of 2 (or more) *
>> residences*,
>> not merely the ownership of 2 (or more ) properties.
>
> So are you saying that when he stops letting property B and starts using
> it as a residence, this would count as an "acquisition" and re-start the
> clock, thus making it eligible for PPR nomination, even though he acquired
> ownership of it 3 years ago?
>
Yes.
--
Doug Ramage
[Watch Spam Trap]
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| Re: Rollover relief on residential letting property [message #197902 ] |
Do, 03 Februar 2005 10:07 |
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"Doug Ramage" <ramage [at] XXukaccountant.net> wrote in message
news:36boqbF515350U1 [at] individual.net...
>
> "Ronald Raygun" <no.spam [at] localhost.localdomain> wrote in message
> news:Ly1Md.5293$8B3.4653 [at] text.news.blueyonder.co.uk...
>> Doug Ramage wrote:
>>
>>> IMO, the 2 year limit applies to acquisition of 2 (or more) *
>>> residences*,
>>> not merely the ownership of 2 (or more ) properties.
>>
>> So are you saying that when he stops letting property B and starts using
>> it as a residence, this would count as an "acquisition" and re-start the
>> clock, thus making it eligible for PPR nomination, even though he
>> acquired
>> ownership of it 3 years ago?
>>
>
> Yes.
> --
> Doug Ramage
>
> [Watch Spam Trap]
>
I should add I think that the clock starts running when the let property is
capable of being a residence, not when the person takes up occupation. This
is likely to be when the tenant moves out - assuming the place is habitable.
:)
--
Doug Ramage
[Watch Spam Trap]
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| Re: Rollover relief on residential letting property [message #197910 ] |
Mi, 02 Februar 2005 16:47 |
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Thanks to all who have replied. It looks like I'll need to be creative
if I want to move the property closer. Given the cost of buying and
selling it will probably be cheaper in the long run to pay a local
letting agent to look after the existing property.
Thanks again,
Nick.
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| Re: Rollover relief on residential letting property [message #199023 ] |
Sa, 05 Februar 2005 20:32 |
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Here's an idea - maybe crazy but got me thinking....
Obviously the only way to minimise or avoid CGT is to make a captial loss.
So how about this?
I bought A for £100,000 - its not worth £150,000 - if I sell this, I pay CGT
on £50k minus the annual exemption
I now buy B for £150,000 and sell it to a family member for £100,000 and
recover the £50k plus interest via the rent over say 5-10 yrs.
I would have no CGT to pay and £100,000 to invest in a new property.
<whatman [at] rmplc.co.uk> wrote in message
news:1107259650.674243.60480 [at] f14g2000cwb.googlegroups.com...
Hi,
I own a second property which was purchased 3 years ago for £103k and
which has been rented out since then (assured shorthold tenancy). This
property is located about 100 miles from where I live. The decision to
buy there was based on the fact that I had family there at the time and
the property prices where much lower than were I live. Since then the
family has moved away and property prices have risen in that area. The
current tenant has decided to move on so now is a good time to move the
property closer to make it easier to manage. I've had some estate
agents around and they have valued it at £210k - £220k, so the
capital gain is substantial. Buying a similar property locally is still
going to cost more than the £220k mark so all the gain will be
reinvested.
I have been advised that rollover relief on capital gains does not
apply to privately owned property that is let on a residential basis.
If this is the case I would be faced with a crippling capital gains tax
bill. It would be more sensible to keep the existing property and
employ someone to manage it.
Can anyone shed any light on this for me? Is there any way I can avoid
capital gains if I sell up and reinvest?
Thanks in advance,
Nick.
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| Re: Rollover relief on residential letting property [message #199034 ] |
Sa, 05 Februar 2005 22:21 |
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"Jeff" <Jefree76 [at] yahoo.remove4nospam.co.uk> wrote in message
news:cu370d$dut$1 [at] sparta.btinternet.com...
> Here's an idea - maybe crazy but got me thinking....
methinks you have missed a bit out of your idea.
> Obviously the only way to minimise or avoid CGT is to make a captial loss.
> So how about this?
>
> I bought A for £100,000 - its not worth £150,000 - if I sell this, I pay
> CGT
> on £50k minus the annual exemption
Yep, so are you selling it or not?
> I now buy B for £150,000 and sell it to a family member for £100,000
This will give your relative a CGT problem when they sell.
> and
> recover the £50k plus interest via the rent over say 5-10 yrs.
How do you gain from renting out a property that you no longer own.
> I would have no CGT to pay and £100,000 to invest in a new property.
How is it that you have no CGT to pay?
If 100K houses now cost 150K what can you buy with your 100K?
tim
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