Woman hit with HMRC tax warning after selling flat she's never even lived in
The mum paid the bills for the property and didn't charge any rent to her children.
A mum contacted HMRC to ask if she would get a capital gains tax bill in selling a flat. The woman reached out to the tax authority over X to ask: "Could you tell me I bought a flat for my children to stay in while at university. I paid the bills for it.
"If I sell this flat when they leave university do I have to pay capital gains tax as no rent was charged and it was used solely by my children during their studies?"
HMRC responded to say they would look into the question, with the woman expressing her thanks as she had called up about it but was cut off after waiting an hour and 15 minutes.
Once they had checked the rules, the representative said in response: "As you personally have never lived in the property, you can't claim Private Residence Relief.
"You will be liable to capital gains tax when you dispose of the property if you sell for more than your acquisition cost. It doesn't matter that you did not receive any income from the property during the time of ownership."
The official referred her to this information page with more information about how capital gains tax works.
They added: "At the moment, when you dispose of a residential property, you are required to report the disposal and pay any capital gains tax due within 60 [days] from the date of conveyance."
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The woman faces a bigger tax bill than she would have paid a couple of weeks ago, as the capital gains tax allowance reduced from £6,000 to £3,000 from the start of the new tax year.
However, another change to the tax came in from April 6 providing relief for some property sellers.
In a policy change announced in the Spring Budget, the rate paid by higher or additional taxpayers on residential property has dropped from 28 percent to 24 percent.
Chancellor Jeremy Hunt said in his Statement that this policy change would increase tax revenues, but one economist said at the time he "would like to see the workings" on this claim.
Economist and University of Warwick professor, Arun Advani, said: "Sure we might have more transactions, but if someone always owns the asset, not sure how it increases revenue.
"I think the point is that we get less money in total, but more within the scorecard window. Need to look at in more detail, but seems very short term thinking."
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