Capital Gains on house sale query?

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u2meetsrem

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Can anyone explain how capital gains tax would work in this scenario concerning a family member?
House bought for £50,000 (say 63,500 Euroish)
Owner has moved house in 2004 but house has been lying idle most of the time since & rarely rented out, maybe for 6 months in total.
Now intends selling house which has not been the family home since 2004 & should fetch 300,000.
What would the tax liability be on this or how would it be calculated.
 
When was it bought?
When was it rented out initially and in total?
Where has the owner been living in the meantime?
 
Seeing that it was rented out for 6 months out of a total ownership period of 18 years then I presume that c. (0.6 / 18) * 100 = 3.33% of any gain arising would be assessable for CGT? On the other than I'm not sure if CGT is chargeable on the full period during which it was not a PPR (minus the first year which is CGT exempt even if rented) or just the portion during which it was rented. Probably best to get independent, professional advice. At least it was not rented within five years of purchase as an owner occupier so no stamp duty clawback applies!
 
ClubMan said:
Seeing that it was rented out for 6 months out of a total ownership period of 18 years then I presume that c. (0.6 / 18) * 100 = 3.33% of any gain arising would be assessable for CGT? On the other than I'm not sure if CGT is chargeable on the full period during which it was not a PPR (minus the first year which is CGT exempt even if rented) or just the portion during which it was rented. Probably best to get independent, professional advice. At least it was not rented within five years of purchase as an owner occupier so no stamp duty clawback applies!
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You seem to be going on the basis that only rented houses are subject to CGT. All properties other than your PPR are subject to CGT and it does not matter if they were ever rented.
 
That's why I said I was not 100% sure:
On the other than I'm not sure if CGT is chargeable on the full period during which it was not a PPR (minus the first year which is CGT exempt even if rented) or just the portion during which it was rented.
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I guess the CGT liability is likely to be nearer ((18 - (n + 1))/18) * 100 of any gain where n is the number of years that it was the owner's PPR so?
 
I think WOODS is right.
If not living there, not ppr then CGT applies and capital appreciation.
 
Yes, woods is right and revenue apparently calculate using months - at least when I spoke to a tax consultant recently, that's how he calculated it.

The owner would also be entitled to indexation relief for the period of ownership from 1988 up to 31 December 2002. Here's another CGT thread.

Have a look at Revenue's CGT leaflet here.

The property owner would be wise to seek professional advice - as Clubman pointed out - Revenue will not tell you what you're entitled to unless you claim it, so it's better to have an expert handle something like this as the amount of chargeable gain in this case would appear to be substantial.
 
woods said:
You seem to be going on the basis that only rented houses are subject to CGT. All properties other than your PPR are subject to CGT and it does not matter if they were ever rented.
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Very confused with some of these replies.

The house thye bought for 63,500 in 1989/90 will be sold for 300,000 plus if sold in 2006.


the year expenditure occurred = 1989/90
disposal year 31 dec 2004 plus = 1.503 plus is multiplier used based on CGT link

Am I to understand from this that the initial fee they bought the house for, say 63,500 multiplied by say 1.5 which is the multiplier government use as per the link apparently = 95,250 say 100,000.

So even with all the expenses occurred in purchasing & selling (say 50,000 as it was never morgaged to begin with), there would be a tax liability on a % of well in excess of 150,000 Euro on the sale of this or am I missing something here?
 
u2meetsrem said:
Very confused with some of these replies.

The house thye bought for 63,500 in 1989/90 will be sold for 300,000 plus if sold in 2006.


the year expenditure occurred = 1989/90
disposal year 31 dec 2004 plus = 1.503 plus is multiplier used based on CGT link

Am I to understand from this that the initial fee they bought the house for, say 63,500 multiplied by say 1.5 which is the multiplier government use as per the link apparently = 95,250 say 100,000.

So even with all the expenses occurred in purchasing & selling (say 50,000 as it was never morgaged to begin with), there would be a tax liability on a % of well in excess of 150,000 Euro on the sale of this or am I missing something here?
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I do not think that you are missing anything. You pay tax on your profit at 20%. Everybody should be glad that the bad old days of 40% have gone.
 
Taking your numbers for indexed up purchase cost of approx 100,000, and a resale price of 300,000

The worst case scenario would be : 300000 - 100000 = 200000 liable to capital gains tax.

200000 x 20% = 40,000 CGT payable.


How can this be avoided? Take the necessary steps to define the house as the owner's primary private residence. Certainly the owner should talk to a tax consultant as soon as possible to clarify the situation.
 
kesey said:
How can this be avoided? Take the necessary steps to define the house as the owner's primary private residence. Certainly the owner should talk to a tax consultant as soon as possible to clarify the situation.
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If he now changes this house to his PPR he will not be exempt from CGT if he sells it in 2 years time. He will only be exempt for the gain during the time when it was his PPR. He will still have to pay for the gain when it was not.
 
I understand you have two years to sell your house (PPR) once you vacate. Whether this is true or not, the gentleman should see a Tax Consultant and find the best, most correct way of sorting out his difficulties.

Anything said here is no doubt invaluable and will help the gentleman when talking to his Tax Consultant.

woods said:
If he now changes this house to his PPR he will not be exempt from CGT if he sells it in 2 years time. He will only be exempt for the gain during the time when it was his PPR. He will still have to pay for the gain when it was not.
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woods said:
I do not think that you are missing anything. You pay tax on your profit at 20%. Everybody should be glad that the bad old days of 40% have gone.
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God help us if [broken link removed] ever get into power!
 
delgirl said:
God help us if [broken link removed] ever get into power!
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I am inclined to agree with them on that one. Why should the rich pay 20% tax. You can structure your affairs so that all your income is actually a capital gain and you have very little income. You can still make plenty of money but only have to pay 20%
 
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