Member Article

West Yorkshire lawyer warns home workers about potential Capital Gains Tax liability

With the recent surge in remote working and the adaptation of homes to accommodate office spaces, West Yorkshire lawyer John Howe of John Howe & Co is cautioning individuals who work from home about a potential capital gains tax (CGT) liability they may face when selling their main home. Under the current regulations, when you sell your own main residence, you are not required to pay any capital gains tax on the increase in its value. This exemption, known as the residence exemption, has been a significant benefit for homeowners. However, if a portion of the property is used for business purposes, such as permanently adapting an annex or a room as an office or workshop or garden office room, the residence exemption may not apply to the entire property. In such cases, the selling price should be apportioned, and tax paid on the proportionate value of the property used for business purposes. John Howe explains: “Many individuals who have embraced the convenience of working from home and have adapted their living spaces accordingly may unknowingly find themselves with a potential capital gains tax liability when they decide to sell their property. It is crucial for home workers to be aware of this aspect and take the necessary precautions to avoid any future tax-related complications.” One of the key issues to consider is that capital gains tax is a self-declared tax, meaning that individuals are responsible for assessing and paying the tax when applicable. Often however if the property is marketed as having an office or workshop or claims have been made in previous years accounts for relief for use of the property as a work space, then the previous use can be undeniable.
Failure to pay the tax, if determined by Her Majesty’s Revenue and Customs (HMRC) upon review, can lead to not only paying the outstanding tax but also potential penalties and interest. John Howe is urging individuals who have converted parts of their homes into office space to take proactive steps to assess their potential tax liability and ensure compliance with CGT regulations. He said: “It is better to be proactive and address the CGT implications during the planning and preparation phase rather than facing potential penalties and interest in the future. Consulting with a professional can provide the necessary clarity and peace of mind.”

This was posted in Bdaily's Members' News section by News Gathering .