I am receiving conflicting advice about my flat in Leeds I sold July 2007. The key question is whether I should be declaring any of the gain on my tax return for CGT.

I purchased the flat while studying at Leeds University in 2000. It is the only property I have ever owned. I brought it off plan . When it completed I stayed in it for less than a week as I quickly realised it was too far from University. I decided then to rent it out and kept it rented until March 07.

In March I decided I should sell it as I had now moved back to London and could use the proceeds to buy something there. Before putting it on the market I asked a tax consultant friend of mine whether I had to declare any of the capital gain from the sale proceeds. He said the law was a grey area in this respect. Because it was my only residence (I own no other property) and I had spent at least some time living in it (there is apparently no minimum time frame that validates a principal residence) I should be ok to treat it as a principal residence for tax purposes. Typically there is a 3 year rule that says if a principal residence is later let out for over three years, any gain on the property value after 3 years is subject to CGT. I know the value of my flat stayed constant (maybe +£5000) from 2004-2007 as I requested regular valuation updates.

Do I declare; no CGT? £5000 gain? £? gain based on national house price inflation data covering taxable period? or All the gain?

Looking back had I fully understood the tax law I would have mitigated the ambiguity by selling and buying another property to live in full time but I believe the rules were even more grey back in 2000.

Any advice would be appreciated, thanks

You should calculate the gain following the principals of HMRC guidance. It would be prudent to engage an appropiate professional advisor to calcualte the gain for you.

PPR relief would probably not apply in full in your case. Letting relief might.

Retail price index allowances do not apply to purchases made by individuals after April 1998. Taper relief may apply instead.

Furthermore if you are required to submit a tax return you should notify HMRC by 5th October following the end of the tax year - you may already be subject to a £100 penalty.

Hi

I think the answer is 'yes' you will be subject to some cap gains. It's not really a grey area and the three year rule you mention does apply.

You 'll find the answers in Property Tax Secrets http: / /www .propertysecrets .net /shop _browser .html

And, as per the advice above, I'd suggest talking to an accountant pronto.

cheers

Thanks for the advice, much appreciated

I can't be categorical about this,( you might check with your accountant if it suits your circumstances) but
isn't it the case that if it's your main residence, you only have to live it for six months after it was last let
in order to wipe out any CGT obligation?

Hi Howard

No, it is not as simple as that and, as the original post said, there is no absolute amount of time that is needed to make it a primary residence, it's more about how you live there - connect to utilities and so on in your own name. You have to live in it before letting and after the letting period and then a three year rule applies. I'd really recommend a look at Property Tax Secrets on this issue and consultation with an accountant.

cheers