capital gains tax

[peterwilson]

Hi
I and my brother own a house together.
We both moved out and rent out the house.
I now claim mortgage relief on my new house.
My brother still has his mortgage relief in 'our' house.

When we sell will we have to pay capital gains tax?
If so is there any way around it?

thanks
P

 

[ClubMan]

If you moved out and rented the property within 5 years of the original purchase as owner occupiers then you are liable for a clawback of stamp duty now.

Your brother should not be claiming owner occupier mortgage interest tax relief if he is no longer an owner occupier.

If the property is sold within 12 months of vacating it as your PPR then not CGT applies. Otherwise some portion of any eventual resale gain is assessable for CGT. For example if you lived in the property for 6 years then moved out and rented it for 3 years before selling it then ((3-1)/6) = 2/6ths or 33% of half (since your brother and you are presumably 50:50 co-owners) of any resale gain will be assessable for CGT using the normal calculations.

 

[peterwilson]

Thanks Clubman.

I've been living away for 6 months. We own the house 4 years. (I lived there 3 1/2 years with my brother)

My brother is still living there alright and we plan to sell in one years time.

Would that mean we would pay zero CGT?

thanks
p

 

[ClubMan]

I've been living away for 6 months. We own the house 4 years. (I lived there 3 1/2 years with my brother)

Sounds like you are liable for the SD clawback so.

My brother is still living there alright and we plan to sell in one years time.

This contradicts the following in your original post:

We both moved out and rent out the house.

Would that mean we would pay zero CGT?

No - if you lived there for 3.5 years and then rent it out for 1.5 years then, in addition to your share of the SD clawback liability, c. (( 1.5 - 1) / 5) = 0.5/5 = 10% of your share (presumably 50%) of any resale gain would be assessable for CGT. You might want to do those calculations more accurately (e.g. based on months, weeks or even days) but the year based calculations give you a rough idea. You brother's calculations would depend on how long he remains an owner occupier etc.

In the meantime the normal rental tax treatment applies to your share of the property.

As with most people with investment/rental properties (albeit which may have previously been PPRs) you probably need independent, professional advice.