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June 17

by Millie Wickens
Landlords could be set to pay more capital gains tax as a result of tax changes

Landlords could be on course to lose out to a measure aimed at tackling tax avoidance by property investors.

The government plans to reduce capital gains tax (CGT) exemption for landlords by 50 per cent, in a move to reduce false relief claims for living in a rented home.

The measure will increase capital gains tax bills on disposal of investment property for all buy to let and shared house landlords.

From April 2020, the government wants to cut an 18-month CGT exemption offered to reduce tax if the owner experiences any delays in completing the sale to nine months.

The exemption is part of a government revamp of principle residence relief (PRR) that will also see the abolition of lettings relief.

Landlords qualify for the relief if they have lived in the rental property as their main home at any time during the period of ownership.

But tax experts argue cutting the relief could leave some property owners with a tax bill when they have faced genuine problems in selling a home.

Aparna Nathan QC, chair of the Chartered Institute of Taxation’s CGT & Investment Income Sub-committee, said: “If HMRC have serious concerns about abuse of the PRR, they could consider conducting a broader consultation about the objectives and effectiveness of the relief.

“It is important for HMRC to provide the evidence base that has been used to evaluate whether nine months is sufficient time for those who are genuinely trying to sell to move to a new house particularly as there are likely to be large regional variations and differences depending on property values.

“There are some circumstances where nine months will not be enough time to sell the family home. In the case of ‘no-fault’ divorce, where the property is to be sold, the time limits may prohibit a sale until more than nine months has elapsed. Consideration should be given to whether an exception should be available.”

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