Capital gains tax on sale of second property.

rmcc1978

Hello all!

My question relates to a property which was inherited a number of years ago.
It is not my main residence and as I am nearing retirement and planning to reduce my working hours I intend to sell the property.

I realise that the obvious tax implication is Capital gains tax @ 20% on the difference between the value at inheritance (indexed) and the sale price.

My question, finally

Can I move to the second house for say 6 months - 1 year, Register this property as my PPR and then sell after this period and be exempt from capital gains tax, and then return to my original house?.

Thanks

NaasMan

Yes you can move in and claim it is your PPR, but the PPR claim will only take effect from that date. So if you have owned the property for say 3 years in total and you used it as your PPR for say 6 months, 6/36ths of the gain would be exempt from CGT. You can not claim a full exemption from tax on the basis that this property is your PPR for 6 months.

rmcc1978

What About,

Set up a property company, put the property into the company as capital. Then sell the property ( taxed as profits @ 12.5%) then take salary from the company and/or invest proceeds and set up pension plan through the company?

Hanley

rmcc1978 wrote: »

What About,

Set up a property company, put the property into the company as capital. Then sell the property ( taxed as profits @ 12.5%) then take salary from the company and/or invest proceeds and set up pension plan through the company?

Then you're into the realms of closed companies etc...

rmcc1978

Ah well,

Thanks for the replies folks!

dooloo

bad idea to ever put property in to a company.

firstly the property going in to the company would constitute as a disposal and you would have to pay cgt on the market value of the property when put in to the company less indexed cost.

also the company, if selling the property at a profit, pays capital gains tax at 20% on any gain. You then pay tax at the marginal rate to take the proceeds out of the company along with all the costs of setting up a company, maintaining tax and CRO returns, and closing the company up in the end!

NaasMan

How about selling your current PPR and moving into the second property. You would not have to CGT on your current PPR

Newaglish

NaasMan wrote: »

How about selling your current PPR and moving into the second property. You would not have to CGT on your current PPR

Yeah there would still be a CGT liability on the x number of years he has already owned the property but the longer he lives there, the less the CGT liability will be - provided the property doesn't skyrocket in value (i'm guessing it won't somehow!)

To illustrate what I'm saying: if you've owned the property for three years and make a capital gain of €20,000 you will pay tax as:

€20,000 * 20% = €4,000

However, if you sell your PPR, move into the new house and sell it 5 years later at a gain of €40,000, your CGT will be:

€40,000 * 20% * 3/8 = €3,000

This all depends on whether or not you want to live in the new property.

Otherwise there isn't really a way of getting out of a CGT liability. Incidentally, did you pay CAT when you received the house?

NaasMan

Newaglish wrote: »

Yeah there would still be a CGT liability on the x number of years he has already owned the property but the longer he lives there, the less the CGT liability will be - provided the property doesn't skyrocket in value (i'm guessing it won't somehow!)

To illustrate what I'm saying: if you've owned the property for three years and make a capital gain of €20,000 you will pay tax as:

€20,000 * 20% = €4,000

However, if you sell your PPR, move into the new house and sell it 5 years later at a gain of €40,000, your CGT will be:

€40,000 * 20% * 3/8 = €3,000

This all depends on whether or not you want to live in the new property.

Otherwise there isn't really a way of getting out of a CGT liability. Incidentally, did you pay CAT when you received the house?

Agreed that he will have to pay some level of CGT if and when he every sells the second house, however, in the here and who, he would sell the first house with no CGT and move into the second house, assuming that he would be willing to make such a move. If he planning on living in the second property for the rest of his life, CGT would not be an issue, however, if he does not, at least this would five a better tax answer.

Point to note, if and when the second property is sold, the purchaser will request a CAT clearance, so if you did not make a CAT return (ever if their was no CAT to pay) would should do so now.

dennisc3508

Hi can anyone help my wife inherited a house about 8 years ago we lived there for 2 years then moved to another house ,we left the house about 2years , if we moved back in To first house how long do we have to live there in order to sell and avoid c g t .

jus_tin4

If classed as your ppr during that time the 2/8 of the gain would be cgt exempt

dbran

This is a forum about accountancy and if you read the charter you will note that detailed or structured tax advice is not allowed.

Please get professional advise and do not use a free online forum as a substitute.

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