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  • Tax

    Minimise Capital Gains Tax - move into BTL?

    Cheers guys

    Can someone please confirm how I can claim 'Entrepeneurs Relief' when paying the CGT bill?
    Do I need to move into the property, do I need a Ltd company etc

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    You seem to be missing the point, have you read through the thread I attached on Monday.

    Entrepreneurs Relief is available when you sell a business, such as a FHL. Entrepreneurs Relief is not available when you sell an investment, such as a BTL.

    If you convert your investment into a business and satisfy the criteria you can claim Entrepreneurs Relief when selling the business.

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    yep

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Is the property on a buy to let mortgage?

    If so, you can't live in it as would be breaching the terms of the mortgage.

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    HMRC don't care what nortgage product you use.

    They are just concerned with the quality of the occupation status not whether you have been gaming the system.


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    I'm not talking about HMRC here Paul.

    I'm talking about breaching lenders terms and conditions,  lenders would be well within their rights to call in the loan if they catch someone Gaming.

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    This has been raised before and it seems to be a matter of timescales. If the lender calls in the loan after a period of letting, it may not be that terrible as the intention is to sell the property at reduced CGT anyhow. If the minimum 12 months hasn't been achieved then it becomes a problem.

    I'm not sure if its possible to get consent for this from a lender as per letting on a residential mortgage?

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    I think that's the other way round Gary as in letting out a property that you bought on a residential mortgage.

    This way round is moving into a property that you've bought on a BTL mortgage,  get caught doing that- you're toast.

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    These lenders would be within their rights to call in a loan.

    LL who intend to sell won't care.

    To achieve the reliefs are the important things.

    Highly unlikely a BTL lender would be able to detect a LL living in the BTL prior to selling the property.

    Lenders simply don't bother unless the issue is highlighted by not paying the mortgage on time.

    Quality of occupation status is what it is all about.

    HMRC don't care what facility you have used for the property.


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    The notes on this area are long and detailed, and more information would be needed, but very briefly, if you have a genuine period of main residence for the last 18 months of ownership, it will entitle you to some private residence relief. So if you have let the property out for 21 years at the time of sale (assuming a sale is made in 2020) and would have lived in it for the last 1.5, the private residence relief would be 1.5/21 which equals about 7% of the gain. On top of this you may be able to claim another relief called private lettings relief which would reduce the gain further.
    This is calculated at the lower of three figures.
    •    The gain while let out
    •    The PPR relief
    •    £40,000
    Thus no PPR relief, no private lettings relief. This is per spouse so if it is jointly held it would apply for each of you. Of course there may be other ways to reduce your CGT liability too depending on circumstances. 
    Above I mentioned that there must be a genuine period of main residence to qualify for this relief. We are often asked how long you must live in a property for it to be treated as your main residence for tax purposes.  You will hear varying periods from lots of tax advisors and accountants, but there is no actual minimum period.  It is really a case of quality, and not so much a case of quantity.  By quality we mean that HMRC would expect that you genuinely intended on making the property your main residence.  If you moved house, you would change all manner of things, such as registering the TV licence and council tax to your name and new address, changing doctors, perhaps the kids changed schools.  You may have genuinely intended to live somewhere, but perhaps a month later something completely unexpected may happen, such as a family death, which may change all your plans

    This is very much scratching the surface, but in the avoidance of doubt, professional tax advice would be recommended. 

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    RITA4Rent (Rental Income Tax Advisors)

    Specialists in Landlord Taxation

    Recommended tax advisors of the Residential Landlords Association

    Follow us on Twitter @Rita4Rent

    clients (at) rita4rent (dot) co (dot) uk

    http://www.rita4rent.co.uk