Capital Gains Tax - Family Home

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Popular Misconceptions If your house has a generous amount of land attached to it, together with outbuildings, you may find that only part of the sale of the house/land is exempt from Capital Gains Tax. If you sell off part of the land before or after the sale of the house there are various complications that need to be considered. You cannot rely on the Capital Gains Tax exemption when you buy a house, do it up and then sell it. In order to obtain any of the Capital Gains Tax exemption it is necessary to ensure that the property does, at some point, represent your only or main residence. The occupation of the property must achieve the necessary degree of continuity or permanence. Let or Partially Let Property A further exemption is available if your only or main residence has been let as residential accommodation at any time in your period of ownership. The exemption is available for periods of non-occupation by the owner, as well as for lettings of part of the residence whilst the owner is still in occupation. Gifts with Reservation of Benefits (Inheritance Tax) Did you know that where a parent has gifted their house to their son or daughter whilst still living there, this arrangement would be caught by the "Gifts with Reservation of Benefit" rules and the house would therefore still be included in the parent's estate on death for Inheritance Tax purposes? Over the years various schemes or arrangements have been used to avoid these rules. With effect from 2005/2006, however, the Government have introduced the "Pre Owned Asset Rules" which make most of these schemes ineffective. If you have used one, you need to consider your position urgently.

It is widely believed that on the sale of your home no Capital Gains Tax is payable. However, when is your house not your home for Capital Gains Tax purposes? If you have a second home you must decide which of your two homes is regarded as your "Principle Private Residence" for Capital Gains Tax purposes. The decision must be carefully considered. You must make your mind up within 2 years of purchase of the second home. If you would like to discuss any of the above issues in more detail, please contact Les Styles or John Ellis at Styles & Co on 01925 761600.