CGT on Holiday homes

System
System Posts: 100,537 🤖 Admin 🤖
edited June 9 in General accounting discussion
This is my first post on the forum as a recently qualified AAT Technician so please treat me gently!

I was involved in a discussion re CGT on holiday homes the other day and would like to see if your thoughts were along the same lines as mine.

Scenario is the house was bought as a holiday home seven years ago and now the owners intend to sell their principal residence and move into the "holiday home" for a year before selling up to buy a bigger house.

They are under the (wrong?) impression that if they live there for a year then they are exempt from CGT.

I have explained that they will automatically get 36 months relief if they live there for any length of time as PPR but the rest of the gain would be chargeable.
Workings would be
Gain x 36/total ownership = chargeable gain
Taper relief 70% chargeable
Less Capital allowances

Is there anything else to take into account or does anyone have another opinion on this?

Comments

  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:CGT on Holiday homes

    Essentially once you have 2 homes you basically have 2 years to make an election as to which is going to be your principal private residence. The property which is the PPR will not have CGT implications.

    You do have to reside in the property, not just own it, to be able to to nominate it as your own home. It is sensible to have the property with the highest value nominated as your PPR.

    In terms of your calculations:

    Why are you deducting capital allowances on disposal of a capital asset?

    Where is your annual exemption? This is deducted from the net chargeable gain.

    Please note taper relief is ALWAYS the last relief given i.e. after personal allowances, brought forward losses etc.

    Regards
    Steve
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:CGT on Holiday homes

    Oops - For capital allowances read personal allowances.....
    The AAT textbook suggests that the personal allowance is taken after taper relief (unless I am misinterpreting the text!)
    Cheers
    Lyndon :?
  • System
    System Posts: 100,537 🤖 Admin 🤖
    Re:CGT on Holiday homes

    Hi Lyndon,
    Sorry Lyndon, I confused you there! Personal allowances are NOT reliefs, they are reliefs and therefore personal allowances should be deducted after all other reliefs e.g. taper relief, loss reliefs etc.

    Kind regards
    Steve

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