26 Feb 2016

A question about : Is there a timescale for PPR?

according to the gov:

You don’t pay Capital Gains Tax when you sell (or ‘dispose of’) your home if all of the following apply:
you have one home and you’ve lived in it as your main home for all the time you’ve owned it
you haven’t let part of it out - this doesn’t include having a single lodger
you haven’t used part of it for business only
the grounds, including all buildings, are less than 5,000 square metres (just over an acre) in total
you didn’t buy it just to make a gain
I was just wondering on the actual context of the last statement because I wouldn't know how that last one can be justified.

I am looking to buy my first house, I've been looking at quite a few auctions for the areas that i like and have seen some bargains been snapped up.

But my only concern is with the statement above, if i buy a house at auction which is considered a bargain (assuming MV is at Ј100k and managed to buy it for Ј75k) then a year later it rises to Ј110k and i get tempted to sell the property due to the rise in value would that be classified as 'buying it just to make a gain'? even though at the time of buying I hadn't thought of selling but due to it now being profitable i decide to sell?

I understand that if i wasn't going to buy for profit in the first place then i wouldn't need to ask this actual question, but these days I'm sure 99% of home buyers look to buy a property which they think will hopefully rise in value whether that be in 1,5,10,20 years.

Best answers:

  • you didn't buy it just to make a gain
    my emphasis. If you've lived there, clearly it's your home. So you bought it as a home AND possibly to make a gain, but not just to make a gain.
  • that clause is there to provide a basis under which HMRC can challenge you if there is, for example, a pattern emerging whereby you have a succession of purchases and sales each showing a gain. HMRC would then argue that you were buying to sell and in that case are a property trader liable to income tax not CGT
    clealry such circumstances are unusual and hard for HMRC to prove. As a FTB you are scaring yourself totally unnecessarily. Buy it, live there fore however long you need to and then sell without fear
  • thanks for the advice guys, yes i think i was just taking the 'better safe than sorry' approach abit to the extreme in that instance. But at least my mind is at rest and i don't have to think about that issue any further.
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