When selling your home, whether it’s your main or only place of residence, you would previously have been correct to assume that the sale would be exempt from Capital Gains Tax (CGT).
Recently though, HMRC has been challenging claims that property sales are exempt from CGT. The basis of this is a rule whereby when a property has been purchased with the intention of making a profit, the CGT exemption does not apply. The worrying aspect is that this is true of property sales by virtually every home-owner in the UK! Previously, the rule has only been applied when the sale is very obviously for profit-only reasons, ie. when the property was never intended to be lived in. An example would be when the next buyer for the property has been lined up before the sale has been finalised.
There have lately been a worrying number of tribunal and Court cases in which HMRC has challenged claims that gains on property sales are exempt and where the decision has gone against the home-owner. There is clearly a move towards assessing what constitutes ‘residence’ in terms of type and longevity, rather than simply establishing whether property is a ‘home’.
If you are selling a property and would like advice on whether it may be liable to Capital Gains Tax, please call Martin Johnson, partner at Torgersens, on 0191 567 8611 or email XXXX.
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