Moving house but renting original PPR-StampDuty/CGT liability?

T

tanb

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We built the house (house A) that we presently live in as a self build 2 years ago and paid stamp duty on the site at that time. We have used this house as our PPR for the past two years. In the meantime we purchased another site (and paid the relevant stamp duty) and are in the process of completing a self build of our dream home (house B) on this site. We plan to move to this new house in September and use it as out PPR.

Our initial plan was to sell house A when moving to house B. We put house A on the market in March but no joy. We have substantially reduced the asking price but still no joy. We are now wondering whether we should take house A off the market and rent it out for about a year and hope that the market settles in that time. We do however want to weigh up the pros and cons of both options. What are our tax liabilities if we rent house A for a year? With regards to Capital Gains tax is liability based on profits between valuation on date of sale and original valuation of property or between valuation on date of sale and amount of money originally spent building the property? This is very relevant as there would be a substantial difference between both. If we got an offer on house A in the meantime are there any tax liabilities?
 
tanb said:
We built the house (house A) that we presently live in as a self build 2 years ago and paid stamp duty on the site at that time. We have used this house as our PPR for the past two years. In the meantime we purchased another site (and paid the relevant stamp duty) and are in the process of completing a self build of our dream home (house B) on this site. We plan to move to this new house in September and use it as out PPR.

Our initial plan was to sell house A when moving to house B. We put house A on the market in March but no joy. We have substantially reduced the asking price but still no joy. We are now wondering whether we should take house A off the market and rent it out for about a year and hope that the market settles in that time. We do however want to weigh up the pros and cons of both options. What are our tax liabilities if we rent house A for a year? With regards to Capital Gains tax is liability based on profits between valuation on date of sale and original valuation of property or between valuation on date of sale and amount of money originally spent building the property? This is very relevant as there would be a substantial difference between both. If we got an offer on house A in the meantime are there any tax liabilities?
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There is no FTB exemption on Sites or Land thus you paid Stamp Duty on this at the full rate so no clawback.

You should get this confirmed with and Independent Financial/Tax Advisor. I wouldn't rely on what I said or what an EA or Solicitor said.

You have up to 1 year to sell your old PPR without being liable for CGT. Once this year is up (regardless of whether you rent it) you become liable for CGT. CGT would be calculated based on the (sale price - (site cost + build cost)) * (years not PPR(including the 1 year) / total years of ownership)

Unfortnately the valuation at the time you move out does not come into it. Of course the big kicker is that your house may go down in value in the mean time and you are taxed on a gain over the whole period. The revenue thinking is that not being liable to CGT on your PPR is an exemption which you lose after the year.
 
This is essentially a Property Investment query so has been moved from Mortgages and Buying and Selling Homes.

See this post for a summary of some of the potential implications of renting your former PPR. This thread might also be of interest.

Sell home or keep as an investment?

The issures pertinent to this sort of situation are disusssed again and again in many existing threads so browsing/searching will most likely unearth a wealth of useful info. Get independent, professional advice if in any doubt about the issues and what is the best course of action for your particular circumstances.
 
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