CGT due when home is knocked and 2 more built on site

N

nampara

Guest
I'm thinking of demolishing my home and building two houses on the site, possibly selling one and renting the other one out.

Will I be liable to CGT if I sell one of the new houses - or - can I claim the principal residence exemption because the original house is my principal residence?

I will not be living in either of those two new houses.

Thanks in advance.
 
This is a very complicated area and you should pay for professional tax advice long before you do anything.

I remember from my tax studies that capital expenditure on something which no longer exists, was not allowed for CGT purposes. For example, if you build a swimming pool and subsequently fill it in, the cost of building and filling in, would not be allowed. So I don't know if the cost of buying and demolishing your residence would be allowed.

Brendan
 
There is a misconception out there that you never pay CGT on your principal private residence.

In the normal course of events no CGT arises where a house is sold for its market value for its "current use".

However if the price includes development potential whereby the house will be knocked and a block of flats built on the site then CGT arises on the different between the "current use" value and the price being received........ in other words CGT is paid on the development potential part of the sale price.


In the example above, the house is being knocked and two houses are built. This is different in that there is no sale of the PPR so....... better to seek professional advise
 
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