Home Money I’m a vicar so the church provides housing and I rent out my family home – will I owe CGT if I sell it? HEATHER ROGERS replies

I’m a vicar so the church provides housing and I rent out my family home – will I owe CGT if I sell it? HEATHER ROGERS replies

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Capital Gains Tax - I am a vicar so the church provides housing but I have another house which is rented (File Image)

As a vicar of the Church of England, my accommodation is part of my stipend, so our family home has been rented for around 18 years.

As I get closer to retirement, we are thinking about where we would like to live and are thinking about selling the family home and buying a new house to rent out initially until we actually retire.

When speaking to a friend he suggested that we would be subject to capital gains tax as this would be classed as a business even though it is our main home.

Clergy often have different tax benefits as we don’t receive any salaries, but I can’t find anything about needing to rent family homes when we are provided with clergy accommodation. He would be very grateful for his advice.

SCROLL DOWN TO FIND OUT HOW TO ASK HEATHER HIS TAX QUESTION

Capital Gains Tax – I am a vicar so the church provides housing but I have another house which is rented (File Image)

Heather Rogers responds: This is a good question about work-related accommodations, which actually affects quite a few different job roles, from military personnel to farm workers.

There is a whole section of the Chargeable Income Tax Act 1992 on this very issue. Overall, the rules are helpful and understandable, but there are a couple of drawbacks.

I’ll go over the rules in general terms before moving on to your personal circumstances below.

How does ‘private residence relief’ in capital gains tax normally work?

Normally, subject to certain criteria, your own home qualifies for Private Residence Relief for sale, as it is your only or main residence.

This means you don’t pay capital gains taxes, as you would when disposing of property you didn’t live in.

However, if you live on another property, you will need to determine what your primary residence was.

How does the CGT work?

Capital gains tax is paid on the profits from the sale of an asset: the price you sell it for, less what you pay for it.

Depending on the asset, there may be certain reliefs available and each person has capital gains tax relief to offset their gains.

This was £12,300 in the year to April 2023, when it was reduced to £6,000, and there will be a further cut to £3,000 next spring.

If an asset was transferred to you as a gift, then the value at the time of transfer will be the valuation for the acquisition.

When the asset is left to you by a will, the testamentary value will be the value at which you will be deemed to have acquired it.

You can deduct the costs of acquisition and disposal if applicable, for example estate agent and solicitor fees at the time of sale.

You can also deduct costs that you spent money on and added value to the asset.

Capital gains rates are explained here.

This is normally done by ‘choice’, meaning you decide, but HMRC would need some evidence that you lived in the property you want covered by PRR at least part of the time.

What if you live in work-related accommodation?

Housing is work-related if it is provided for a person’s employment, or for the employment of their spouse or common-law partner, in any of the following cases.

– That is necessary for the proper performance of their functions.

– It is planned for the best performance of their functions and when the provision of housing is usual for that type of employment.

– Accommodation is provided as part of special security measures.

– A natural person or his or her spouse or common-law partner is contractually obliged to reside in premises provided by another person, from where they practice a certain trade, vocation or profession.

What if you already own or purchase your own home while living in work-related accommodation?

If a person owns their own home which they cannot occupy because they need to reside in work-related accommodation, then the home may remain their main residence for capital gains tax purposes, provided they intend to to return to occupy the home once employment has ended.

That said, if you decide when the job is done that you don’t want to move into the home in question, you may never have to occupy the property.

If, for example, you purchased the property during the time you were in work-related accommodation with the intention of moving into it at the end of employment but then your circumstances change and you sell it, provided your intention was to live there, then PRR will be available, until the date you changed your intention.

Once the intention to occupy the house ceases, the house is no longer treated as a residence, so the PRR will not be available from this point on, if, for example, you move to another property while still owning the house. his original house.

However, PRR will be available until such time as intent changes, plus the last nine months of ownership.

HEATHER ROGERS ANSWERS YOUR QUESTIONS ABOUT TRIBUTES

I’m afraid there is no specific definition of “intent.” If HMRC were to dispute the claim, then the taxpayer’s particular circumstances would dictate the likelihood of PRR being allowed throughout the ownership period.

If you had purchased another property, then it would be up to you to prove why and when you decided not to return to your previous residence.

What happens if you rent your home while living in work-related accommodation?

You can still claim PRR, unless the rental period extends beyond the period of residence in work-related accommodation.

In that case, at that time the intention to live in the house would not be supported and then there could be a dispute as to whether the intention to move into the house actually existed.

What about your circumstances?

In your specific case, you have a house that you rent because you live on church property and that would certainly qualify as work-related accommodations. So far, so good.

However, if your intention to move back into the home you have rented ceases, you will no longer qualify for PRR.

However, PRR will be available until such time as intent changes, plus the last nine months of ownership.

The new property would also qualify as long as you move immediately after your employment ends.

If your intention not to return to your old home occurs within the last nine months of ownership, you will receive the full PRR upon the sale of your long-standing property.

Ask Heather Rogers a tax question

Tax expert Heather Rogers answers our readers' questions

Tax expert Heather Rogers answers our readers’ questions

Heather Rogers, founder and owner of Aston Accountancy, is our tax columnist. She is ready to answer your questions about any tax topic: tax codes, inheritance tax, income tax, capital gains tax and much more.

If you would like to ask Heather a tax question, email her at taxquestions@thisismoney.co.uk.

Heather will do her best to respond to your message in an upcoming monthly column, but will not be able to respond to everyone or correspond privately with readers. Nothing in her answers constitutes regulated financial advice. Posted questions are sometimes edited for brevity or other reasons.

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If Heather can’t answer your question, you can Learn how to get help with your taxes here. including sources of free professional advice if you are elderly and/or low-income.

You can also contact money helper, a government-backed organization that provides free assistance to the public in financial matters. Their number is 0800 011 3797.

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