Capital gains tax and renovation intended to be PPR

Hi there, I bought a house 3 years ago to renovate as my PPR. I have had a lot of delays and contractors fall through, and some change in circumstances so now need to sell. During all this time, I had a utility bill at the property and stayed occasionally, while doing some renovation work, and had nowhere else permanent to live, although was fortunate to stay with a few different family members for different periods. I did not own or rent any other property or have any bills. Can I claim PPR exemption from CGT even though I was not staying there all the time? I would like to sell quickly but can't afford a loss and will have to hold out for more money if I need to account for CGT, which would be a shame as property will stay vacant. Any advice welcome, thanks.

Here's what Revenue have to say. Nothing else matters.

In your post you admit to failing the CGT exemption criteria, namely:

"You will be exempt from CGT if you dispose of a property that, for the entire period of ownership, you:

• lived in it as your main residence
• used all the property as your home."

Edmundo said:

I would like to sell quickly but can't afford a loss and will have to hold out for more money if I need to account for CGT . . .

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A CGT liablity shouldn't generate a loss. By definition, you only have a CGT liablity if you make a gain on sale (i.e. you sell for more than you bought) and the CGT liability will only be a fraction of that gain. Even after paying CGT, you'll still trouser more money than you laid out to buy the property.

Thanks for your responses. Unfortunately, as I carried the partial renovation works mainly myself with trips to dump, skips, asbestos etc. surveys commissioned, I don't think I'll qualify for allowable expenses. I have repainted house and replaced missing gutters which i dont think can be claimed. When I factor in all the costs, including extensive work to garden, I will prob make a loss overall as the price increase is not that high based on current offer, although I have the Vacant Homes grant approved and unspent. I may just have to hold out for higher offer.

Edmundo said:

When I factor in all the costs, including extensive work to garden, I will prob make a loss overall

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In that case CGT is irrelevant other than recording the loss in order to hopefully write it off against future capital gains.

is it common practice for people who renovate before moving in to a PPR or who move out for a period of time to add a kitchen extension to pay CGT when the property is subsequently sold?

ClubMan said:

In that case CGT is irrelevant other than recording the loss in order to hopefully write it off against future capital gains

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Thanks but if the costs are not allowable, I will lose some of the money I've spent on property since purchase unless the increase in price is more than 150% those costs if you see what I mean (33% goes to CGT). Thanks all the same.

Edmundo said:

if you see what I mean

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No, I don't understand at all.
Maybe if you post some illustrative figures and calculations it would clarify what your issue is.

If you don't sell for a profit then there's no CGT due.

Edmundo said:

unless the increase in price is more than 150% those costs if you see what I mean (33% goes to CGT)

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Untrue.
CGT is charged at 33% of the gain, not of the proceeds.

I think what Edmundo is saying is that he incurred costs improving the property which he cannot claim as a deduction for CGT purposes because, for — ahem — one reason or another, he cannot vouch them. He wants to sell for a price that, even after meeting any CGT liability which may arise, will still leave him with a sum at least equal to [purchase costs + undeductable expenses subsequently incurred].

Edmundo, I think you're cactus. In so far as the costs you are speaking of are notional costs because, e.g., you did the labour yourself, you used salvaged/recycled materials, etc, you haven't actually incurred those costs; you have avoided them. Costs that were never incurred can't enter into the computation of your gain. And in so far as they can't be deducted because, although they were real costs really incurred, you don't have any paperwork, well, that's a known drawback of incurring costs that aren't properly documented.

The problem arises because, although you intended to make the property your PPR, you never did. A short period during which you didn't live the house because work was being done on it might be overlooked if it became your PPR after the work was finished, but this house has never been your PPR.

TomEdison said:

although they were real costs really incurred, you don't have any paperwork, well, that's a known drawback of incurring costs that aren't properly documented.

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There are ways around that.

The OP needs proper professional advice.

TomEdison said:

Edmundo, I think you're cactus.

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?

By "cactus", I mean that I think that he has no hope —specifically, no hope of claiming a CGT deduction for enhancement ependiture that he either has not actually incurred or has incurred but cannot vouch.

(But Tom suggests it may be possible to claim a deduction for unvouched expenses, and that an adviser could help here. That is certainly worth exploring. So may be Edmundo is not quite as cactus as I thought.)

TomEdison said:

it may be possible to claim a deduction for unvouched expenses

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Of course it's possible. Very few property owners for example will have receipts for significant enhancement expenditure incurred a number of decades ago but these are routinely claimed in CGT computations and there are ways and means of obtaining corroborative evidence to substantiate such claims.

Thank you. You've summarised it correctly TomEdison and that's helpful T McGibney. I have receipts for some things. I can't link them to the property directly, but it's worth a shot with CGT. That said, the safest would be to hold out for an offer that keeps me in the black even if CGT is applicable at its highest level.

Given that you had no other property at the time and that you did stay there sometimes, and had utility bills there you would probably be ok to assume that you can claim PPR relief. If you were paying rent (registered with RTB) then probably not, as you would be recorded as having another address, but you say you stayed with several friends and relatives.