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Capital gains tax when boat is sold?


wetfoot

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For many years my son has lived on a canal boat in London, moving to a different mooring every fortnight as required.  Consequently, as he doesn't have a fixed address unless he permanently moored in a marina, he registered himself at my address for voting purposes and to have an address for correspondence. 
Question: If and when he sells the boat will he be liable for capital gains tax unless he can prove it is his main residence? If so, how can he prove it is his main residence without having a fixed address for the boat? The only 'address' he has is mine. This must be a common problem for people living on canal boats. Any advice would be much appreciated.
 
 
Bit of additional info prompted by some of the replies.
He is paying off a small private family loan over 5 years for part of the purchase cost at £400 pm, nearly paid off. Two years ago he needed to go abroad and rented the boat to a friend for £400 pm to cover the loan until he came back. He returns to the uk permanently in a couple of weeks. Does this make any difference, as HMRC might consider the rental period to be a 'business', rather than a residence?
Edited by wetfoot
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1 minute ago, wetfoot said:
For many years my son has lived on a canal boat in London, moving to a different mooring every fortnight as required.  Consequently, as he doesn't have a fixed address unless he permanently moored in a marina, he registered himself at my address for voting purposes and to have an address for correspondence. 
Question: If and when he sells the boat will he be liable for capital gains tax unless he can prove it is his main residence. If so, how can he prove it is his main residence without having a fixed address for the boat. The only 'address' he has is mine. This must be a common problem for people living on canal boats. Any advice would be much appreciated

I understood that in general they were exempt as a wasting asset (provided it's not part of the course of a business).

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5 minutes ago, BilgePump said:

I understood that in general they were exempt as a wasting asset (provided it's not part of the course of a business).

Please see my edit to my question. Do you think this makes it a business? 

5 minutes ago, Tracy D'arth said:

A boat is a possession like a chattel,  it does not qualify as capital gains unless by way of trade.

 

Tony beat me again!

Please see my edit to my question. Do you think this makes it a business or trade? 

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3 minutes ago, wetfoot said:

Please see my edit to my question. Do you think this makes it a business? 

Please see my edit to my question. Do you think this makes it a business or trade? 

 

Even if it did, and I am not sure about that, CGT would only be applicable for any gains in value during that period and I suspect they would be below the CGT allowance. In any case, I am having trouble imagining how selling the boat would realise a profit beyond the accrued annual CGT allowances. The tax position re income tax during the rental is open to question, as is the legality of the "rental" without the business BSC, insurance, and gas certification. If it was done as you suggest then there was no profit, but rental income tax is complicated.

3 minutes ago, Tracy D'arth said:

It sound very much like an illegal rental without any of the required insurances or additional safety inspections. I would keep very quiet about this and hope that nothing bad happens before he takes possession again. 

 

You beat me this time! I agree. Don't complicate the issue.

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7 minutes ago, wetfoot said:

Please see my edit to my question. Do you think this makes it a business? 

Please see my edit to my question. Do you think this makes it a business or trade? 

My first thought is that this probably wasn't rented out with CaRT's knoweldge but an informal things between friends.

How much HMRC knows and how the £400pm has been paid will be important.

Whose name was the licence, insurance etc in?

£400 per month isn't a commercial rate even if his mate was paying for the licence on top.

Guessing he should quietly move back onboard when he returns and forget about his previous unofficial 'lodger' unless it has all been a formalised affair.

 

Obvious caveat - no experience of this, not a lawyer or tax professional

 

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Capital Gains Tax will not apply as it is a depreciating asset. Certain items such as jewellery, works of art would be less of course the costs of acquisition and sale.

Rental income as is all untaxed income must be declared. Tax is payable at your highest rate(s) of tax. As an individual you have few is any allowances you can claim which is why most people rent through limited companies. Also companies have limited liabilities....

What concerns me here is whether you can or should ever have rented. Notwithstanding anything else, I would doubt your insurance (if you have it) will cover damage or third party losses. In this case you as the owner would be personally liable. Think what happens if the renter gets electrocuted - an extreme case but there is a real likelihood that you as the owner will be held personally liable and the cost will be £10,000s. It amazes me how many people think renting is a good idea without thinking about the possible consequences. Mind you, HMRC would probably never find out and that is sad and unfair on those who do pay tax say through PAYE.

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After 51 years of owning boats, a total of 8 in that time.

If I were to compare it to investing, I'd say it was like standing in a field in the pouring rain while ripping up £50 notes.

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I don't think it has been mentioned so far, but AIUI the original intention when buying the boat is important. If it was purchased as an investment with a view to selling later and making a profit, then yes CGT is payable. If it was purchased for some other reason and the gain was unexpected and accidental, then no CGT is due. 

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On 24/03/2023 at 08:41, wetfoot said:
Question: If and when he sells the boat will he be liable for capital gains tax unless he can prove it is his main residence?
 
If so, how can he prove it is his main residence without having a fixed address for the boat?

 

How much did he pay for the boat? How much does he expect to sell it for?

 

 

22 hours ago, SLC said:

Capital Gains Tax will not apply as it is a depreciating asset. Certain items such as jewellery, works of art would be less of course the costs of acquisition and sale.

Rental income as is all untaxed income must be declared. Tax is payable at your highest rate(s) of tax. As an individual you have few is any allowances you can claim which is why most people rent through limited companies. Also companies have limited liabilities....

What concerns me here is whether you can or should ever have rented. Notwithstanding anything else, I would doubt your insurance (if you have it) will cover damage or third party losses. In this case you as the owner would be personally liable. Think what happens if the renter gets electrocuted - an extreme case but there is a real likelihood that you as the owner will be held personally liable and the cost will be £10,000s. It amazes me how many people think renting is a good idea without thinking about the possible consequences. Mind you, HMRC would probably never find out and that is sad and unfair on those who do pay tax say through PAYE.

 

This is quite specific, and seems to make it clear that a boat which is a continuous cruiser is not a dwelling house, and not liable to CGT:

 

"The analysis which applies to caravans equally applies to houseboats. Houseboats will generally be tangible moveable wasting assets and so exempt from Capital Gains Tax under s45(1) TCGA92.

A houseboat which is permanently located on a site and connected to all mains services may be regarded as a dwelling-house. If the houseboat has been used as an immobile residence for a period of 6 months or more and has had all of its engines removed it should be regarded as a dwelling-house. Other cases should be considered on their specific facts.

Occasionally yachts, barges or other boats are used as the residence of their owner. In some cases, the useful life of the boat is such that it cannot be regarded as a wasting asset and so a chargeable gain may arise on its disposal. Where this is the case the boat should not be regarded as a dwelling-house except in the circumstances explained above which apply to houseboats."

 

 

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On 24/03/2023 at 09:02, Tony Brooks said:

Even if it did, and I am not sure about that, CGT would only be applicable for any gains in value during that period and I suspect they would be below the CGT allowance. In any case, I am having trouble imagining how selling the boat would realise a profit beyond the accrued annual CGT allowances. ...

There isn't any 'accrual' of CGT allowances; any gain over the current annual allowance (£12,300?) Is potentially taxable. With current prices there may be quite a few people selling a boat for £15000+ more than they bought it for - but, as others have said, boats may not be within scope.

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10 minutes ago, Cheese said:

There isn't any 'accrual' of CGT allowances;

 

This is correct. There is no accrual of CGT allowances. You pay CGT when you realise a gain on the gain less the allowance currently available that year.

 

But as mentioned in several posts before, no CGT is chargeable on a boat which is a wasting asset. UNLESS it was purchased in the first place by way of trade, with the specific intention of selling it on at a profit in which case,  normal income tax is payable on the profit (less allowable trade expenses).

 

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