UK Landlord Forum / Life

apologies if this is already posted but it came up with a red code so don't think it went through

During lockdown I transferred the deeds of a house bought in my son's name (owned outright) as he wanted to buy a house with his pregnant girlfriend. (Estate agents were shut and he wanted to be out of a chain when the market re-opened. I eventually sold the house in 2023 and have just had a letter telling me I may be liable to Capital Gains Tax as there is no record of me living there

A friend wanted to buy it off us and asked if he could live there till he was ready to get a mortgage as he was self employed and didn't put enough through his books to qualify. That was a disaster and eventually we got him out and the house on the market. We were advised that if I moved in even temporarily as my main home and paid council tax and utilities I could claim Private Residents Relief? Our family home is in my husband's name

I am hoping it is just a fishing letter as it says "you may need to pay..." points me to their help sheet and that "if you do not need to pay any CGT you do not need to do anything else". There is no demand for payment and as no money changed hands at the time the deed was transfered I don't know how they would assess my liability.

Any thoughts much appreciated.

It might be a "fishing" letter, but the way that tax works is that you have to work out if you owe it and how much and you are responsible for paying it. If shouldn't wait for a demand, the onus is on you to pay the tax you owe.

I don't know who "advised" you about moving in temporarily, but they were wrong.

If I've understood correctly, your son had a property in his name (how it was acquired doesn't matter at this point) which was "transferred" to you.

That "transfer" is basically a sale and purchase. For tax purposes, the sale and purchase are deemed to be at market value. During the pandemic, SDLT rates were all over the place, so depending on when it happened, SDLT might have been due. If it was your son's main or only home, no CGT would have been due on it for him.

When you sold the property, you would be liable for CGT as it wasn't your main home throughout the period. The gain would be based on the difference between the sale price and the notional purchase price (less any costs of sale and purchase). You would be entitled to relief for any period it was your main home plus nine months, so that proportion of the gain would be tax free.

It would have to actually be your main home to qualify for the relief. As the owner you would have to pay council tax and the utilities anyway, so they don't make any difference.

You have to report the details to HMRC within a deadline (30 or 60 days, depending on exactly when it was), whether or not tax is due, and you can be penalised for not doing that. Any tax due also has to be paid to the same deadline. And late payment might have a penalty and interest.

Thanks for your reply, it seems at odds with other info I've read about the Private Residents Relief I've read on the forum but then I'm not a professional landlord and this is all new to me. I think I will just find a good accountant and hand it over to him

The way private residential relief works is pretty simple.

You take the whole change in value over the whole life of ownership, from purchase to sale. If there's any increase (less the costs of purchase and sale), that's the gain. To determine what's taxable gain and what isn't (and ignoring joint ownership and any time you were a live in landlord), you deduct your personal allowance (- £3,000 at present) and apportion the whole gain between any time when the property was your only or main residence and when it wasn't.

If there was any period when it was your only or main residence, you increase that period by nine months and reduce the non-residential period by nine months. And you pay tax on the non-residential portion.

Lots of people think that the status of the property when its sold determines whether there's tax or not, which isn't correct. But it can still be worth moving in for a bit, to gain the "extra" nine months allowance in some cases.