As a vicar for the Church of England my housing is a part of my stipend so our household residence has been rented out for about 18 years.
As I’m drawing close to retirement we’re enthusiastic about the place we wish to reside and are enthusiastic about promoting the household residence and shopping for a brand new residence to initially hire out till we truly retire.
When speaking to a pal he has steered we’d be accountable for capital positive factors tax as this might be classed as a enterprise regardless that it is our most important residence.
Clergy usually have totally different tax advantages as we aren’t waged however I can’t discover something about household properties having to be rented out after we are given clergy housing. I might be most grateful on your recommendation.
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Capital positive factors tax: I’m a vicar so the church offers housing, however I’ve one other residence that’s rented out (Stock picture)
Heather Rogers replies: This is an efficient query regarding job associated lodging, which truly impacts fairly a number of totally different working roles from navy personnel to farm employees.
There is an entire part of the Taxation of Chargeable Gains Act 1992 on this very matter. By and enormous, the foundations are useful and understanding of the state of affairs, however there are a few pitfalls.
I’ll run by means of the foundations on the whole phrases earlier than shifting onto your individual private circumstances beneath.
How does ‘Private Residence Relief’ on capital positive factors tax often work?
Normally, topic to sure standards, your individual residence qualifies for Private Residence Relief on sale, as it’s your solely or most important residence.
This means you don’t pay capital positive factors tax, as you’ll on the disposal of a property you didn’t reside in.
However, in case you reside in one other property, then you definitely would wish to find out which was your most important residence.
This is generally completed by ‘election’, that means you get to resolve, however HMRC would wish some proof that you simply have been residing within the property you need to be lined by PRR at the least among the time.
What occurs in case you reside in job-related lodging?
Living lodging is job-related whether it is supplied for a person’s employment, or for the employment of their partner or civil companion, in any of the next circumstances.
– It is important for the correct efficiency of their duties.
– It is supplied for the higher efficiency of their duties and the place the availability of residing lodging is customary for that kind of employment
– The lodging is supplied as a part of particular safety preparations.
– An particular person or their partner or civil companion are contractually required to reside in premises supplied by one other individual, from the place they keep it up a selected commerce, vocation or career.
What in case you already personal or purchase your individual residence whereas residing in job-related lodging?
If a person owns their very own residence which they’re unable to occupy as a consequence of the truth that they should reside in job-related lodging, then the house can proceed to be their most important residence for capital positive factors tax functions, offering they intend to return to occupy the house as soon as the employment is completed.
That mentioned, in case you resolve when the job ends that you do not need to transfer to the house in query, you could by no means truly even must occupy the property.
If, for instance, you bought the property throughout the time you have been in job-related lodging with the intention of shifting into it on the finish of the employment however then your circumstances change and also you promote it, offering your intention was to reside there, then PRR will probably be out there, as much as the date your intention modified.
Once the intention to occupy the house stops, then the house is not handled as a residence, so PRR is not going to be out there from this level on, if for instance you progress to a different property while nonetheless proudly owning your authentic residence.
PRR will nevertheless be out there as much as the purpose the intention modified, plus the final 9 months of possession.
HEATHER ROGERS ANSWERS YOUR TAX QUESTIONS
There is not any particular definition of ‘intention’, I’m afraid. If the declare was challenged by HMRC, then a taxpayer’s explicit circumstances would dictate the chance of PRR being allowed for the entire interval of possession.
If you had bought one other property then it could be as much as you to indicate why and if you determined to not transfer again into your former residence.
What in case you let your house whereas residing in job-related lodging?
You can nonetheless declare PRR, until the interval of let extends past the interval of residing in job-related lodging.
In that case, at that time the intention to reside within the residence wouldn’t be supported and there may then be a wrangle as as to whether there was an intention to maneuver into the house in any respect.
What about your circumstances?
In your particular case, you might have a house which you hire out as you reside on church property which might little doubt qualify as job-related lodging. So far, so good.
However, in case your intention to maneuver again into the house you might have rented out will stop, then it is going to cease qualifying from that second for PRR.
PRR will nevertheless be out there as much as the purpose the intention modified, plus the final 9 months of possession.
The new property would additionally qualify offering you progress in instantly after your employment ceases.
If your intention to not transfer again into your previous residence falls inside the final 9 months of possession, then you’ll obtain full PRR on the sale of your lengthy owned property.