CGT Rules

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Investmind

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Hi There

Was chatting to an accountant over a bite to eat at the weekend and an a CGT topic came up..Lets say someone lives in an aprt for 4 yrs and then decides to rent it out, he reckoned if you valued your aprt before you started renting it out..Down the line when you decide to sell up completely, you would only be liable for CGT on the value on the date you started renting from (ie new valuation) and not the original purchase price???

Im not an accountant but pretty well up in tax matters (I think), am i right that the above is incorrect??

Secondly, A person thats sells there PPR is not liable to CGT but if they then move into their new PPR, would they be laible for CGT on that property if sold in yrs to come??
 
Investmind said:
Was chatting to an accountant over a bite to eat at the weekend and an a CGT topic came up..Lets say someone lives in an aprt for 4 yrs and then decides to rent it out, he reckoned if you valued your aprt before you started renting it out..Down the line when you decide to sell up completely, you would only be liable for CGT on the value on the date you started renting from (ie new valuation) and not the original purchase price???
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He should go back to school so as he is totally incorrect. The timing of the gain, and in particular the value at the time the property was first rented, is irrelevant. The total gain is calculated and then some portion of the overall gain may be assessable for CGT.
Secondly, A person thats sells there PPR is not liable to CGT but if they then move into their new PPR, would they be laible for CGT on that property if sold in yrs to come??
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On which property? If you mean the new PPR then no - unless they ever rent it out. If you mean that they hold onto the old PPR and rent it out then there could well be a CGT liability on selling that.
 
Investmind said:
Was chatting to an accountant over a bite to eat at the weekend
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Never, ever pay any heed to "pub talk" about tax. Just because someone is an "accountant" does not mean that they know any more about tax than the next person, unless their work includes or involves dealing with tax on a regular basis.
 
Sorry Clubman

Lets say I bought a place 5 yrs ago and have lived there for the 5 yrs and made a 100k gain on my sale today - then CGT would be zero as was my PPR for the 5 yrs

My question is if i buy another place tomorrow and live in that for 5 yrs (my new PPR) and decide to sell that in 5 yrs given another gain of 50k
Would i be liable for cgt on the gain?? (No renting involved here)

Hopefully that makes my question a bit clearer

On the other matter it just shows that because someone is an accountant, that doesnt necessarily mean they are a tax expert!
 
Investmind said:
Sorry Clubman

Lets say I bought a place 5 yrs ago and have lived there for the 5 yrs and made a 100k gain on my sale today - then CGT would be zero as was my PPR for the 5 yrs
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You could live in it for five months and the same would apply! I think you may be confusing the 5 year (now 2 year since Budget 2008) stamp duty clawback rule as being relevant to when you can claim CGT exemption on the sale of your PPR? It's irrelevant here. As long as the property was always your PPR for the duration of ownership and you dispose of it within 12 months of vacating it as your PPR then no CGT applies.
My question is if i buy another place tomorrow and live in that for 5 yrs (my new PPR) and decide to sell that in 5 yrs given another gain of 50k
Would i but liable for cgt this time round?? (No renting involved here)
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No. And again the 5 year period is irrelevant. You are always exempt from CGT on the sale of your PPR as long as it was never rented and it is sold within 12 months of vacating it. Some people also think that if you sell a PPR but then don't buy a new one (e.g. you rent or emigrate) then you are liable for CGT. This too is wrong and you're not.
 
Thanks for that

so therefore throughout a persons life they may have 2 or 3 PPR's which no cgt will be then liable if sold on providing they lived in them as their PPR

I just thought it was a once off
 
No - only one PPR at any one time* but as many as you like throughout your lifetime.

* Ignoring the possible 12 month overlap when selling a former PPR while living in a new one.
 
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