We are all familiar with the relief that means no capital gains tax is payable when we sell our home for a profit.
The relief is given for the period of time that the property is your main residence, plus the last 18 months of ownership, regardless of when you move out.
This is a very valuable relief and so not surprisingly there have been a recent raft of tax cases about when it applies.
The most recent tax case relates to off-plan property purchases.
The taxpayer reserved a property off-plan in 2004, but issues relating to the site delayed construction and he was not able to move in until 2010. The Tribunal agreed with HMRC that the relief would only apply from the date that he moved in, the period prior to this did not qualify for relief.
This means that part of the capital gain made when the property is sold is subject to capital gains tax at the higher residential property rate of 28%.
In summary, if you are buying a new home off plan, bear in mind that significant delays may mean that you have tax to pay on ultimate sale.
For more information please contact Lesley Sutton on 01484 550037 or email firstname.lastname@example.org