Strange CGT scenario

Hi guys,
Over the last decade I have gained an absolute wealth of knowledge from somersoft and propertychat forums and owe a big thanks to you guys! The following might sound a bit confusing and scrambled but please go easy on me its my first post.

I find myself in an odd situation and have spoken with two accountants whose lack of knowledge regarding CGT exemptions has been a little scary. So I decided I'd try and get some guidance here and obviously kick-start the search for a good accountant. Any recommendations would be appreciated.

Background:
Property A- Purchased 1 May 2013 as PPOR. Lived in all these years and moved out on 1 April 2017 upon purchasing next PPOR. Listed this one for sale 1 April 2017.

Property B- Purchased 1 April 2017 as PPOR with a view to live in for the next few years. Moved in here on 1 April 2017

Thought the 6 month CGT exemption overlap would help claim CGT exemption on both properties. Unfortunately the old PPOR has not yet sold and its been over 6 months. We have come to a point where we have to now rent out one of the properties. Neither of these properties were purchased with the intention to produce income and have good equities already which we'd like to preserve as best as possible.

Question:
What I need help with are the two following future scenarios. I'd like to know if these are possible. Please do correct me if I'm wrong.

Scenario 1- We rent out Property A and continue living in Property B. I understand if we sell Property A in the next few years the property will be CGT exempt till 1 April 2017 atleast(when it ceased to be our PPOR). The CGT would apply on the days between 1 April 2017 to sale date if we chose not to treat it as our main residence after moving out on 1 April 2017.
Also, in this case if we sell Property B in the future, can we claim full CGT exemption on it considering it would have been our PPOR since purchase(when Property A ceased to be our PPOR) to sale date?

Scenario 2- We move back to Property A and rent out Property B from 1 Nov 2017. If we sell Property B in a few years, can we claim a full CGT exemption on Property B under continue to treat as main residence after moving out?
More importantly if around the same time we sell Property A would it be possible to claim CGT exemption on it uptil 1 April 2017(as it was our PPOR before we bought and nominated Property B as our PPOR)? Is it correct to assume that CGT will be applicable on Property A for days after 1 April 2017 to sale date even if it hasn't been used to produce any income ever?

Also, we are looking to get valuations and depreciation schedules done before renting out the property to establish a cost base for future CGT purpose. Would it be useful for Property A in future or a pro-rata based calculation be used?

I really appreciate your time and suggestion. The knowledge shared and contributions made by so many of you just amazing!

 

I'm not a tax dude but my understanding is that you can only claim one PPOR at a time, so in either situation one of them will be subject to CGT. The six year rule only applies if you don't have a new PPOR and are renting, for eg; or are not claiming CGT-free status on the other one.

Also, welcome to the forums

 

And whether you receive income or not has no bearing on cgt liability.
Marg

 

Quite simple - I wont give a lengthy explanation as it would be tax advice and I'm not being paid.

Simple matters is A was a main residence and was exempt.
So is B for the period after April 17

When A sells you can use the main residence exemption AND the absence rule until it sells since the 6 months have passed (if not rented its forever otherwise its a max 6 years) and the whole period would be exempt. NOTHING to report. BUT it comes with the catch you MUST choose for the overlap days for B (all of them not just those after 6mths) that B is NOT exempt for any same days...Depends when it sells. The 6 year absence rule CAN be used...No law says you MUST claim exemption on B. Its a choice.

So B retains a prorata CGT issue forever ....If kept for 5 years its like (example) 60 taxable days v's 1826 days BUT non-deductible ownership costs will inflate the costbase. Thats the issue none of them explained I will argue !!
After 10 years its 60days of 3653 days of any calculated profit - Based on the inflated costbase

Other option is sell A and pro-rata CGT on it (based on days). YES you will pay tax but it may be trivial when you add 6mths of ownership costs in the past 6 mths. 100% of B will then be tax exempt going fwd.

Why did two accountants not explain that ? Just watch land tax. A may become taxable if A and B are both owned at the taxing date.

Valuation ?? 100% unnecessary unless you keep A and rent it. Then NO CGT occurs now but the property costbase will become its value when first rented (s118-192) and there is no choice on that. Thereafter when sold if its been a IP its 100% taxed.

You need to weigh up THREE tax positions...You need to also consider what selling A would also reflect.

 

Scenario 1 “The CGT would apply on the days between 1 April 2017 to sale date if we chose not to treat it as our main residence after moving out on 1 April 2017. “

Your understanding is wrong here. Cost base would be reset to value at date first income producing – if you don’t use the 6 year rule.


“Also, in this case if we sell Property B in the future, can we claim full CGT exemption on it considering it would have been our PPOR since purchase(when Property A ceased to be our PPOR) to sale date?”
Possibly can.



Scenario 2- We move back to Property A and rent out Property B from 1 Nov 2017. If we sell Property B in a few years, can we claim a full CGT exemption on Property B under continue to treat as main residence after moving out?
Possibly can


More importantly if around the same time we sell Property A would it be possible to claim CGT exemption on it uptil 1 April 2017(as it was our PPOR before we bought and nominated Property B as our PPOR)? Is it correct to assume that CGT will be applicable on Property A for days after 1 April 2017 to sale date even if it hasn't been used to produce any income ever?
No – cost base reset, see above.


Valuations could be handy depend what you end up doing.

 

Exactly the information I was seeking. You guys are phenomenal! Big thanks
Truly appreciate your time and guidance @Paul@PFI and @Terry_w