Off-plan purchase trap

When you sell your main home the profit you make is normally exempt from tax, but that depends on whether you occupied the property (or were deemed to occupy it) throughout your entire period of ownership.

When you acquire a property before it has been fully constructed, you will own it for a period before it is habitable. This can apply where a property is purchased ‘off-plan’, but it will depend on the precise terms of the purchase contract.

For Capital Gains Tax purposes, your ownership period begins on the day on which contracts for purchase are agreed and exchanged, not on the day the contract is completed. For an off-plan purchase, the contracts may be exchanged many months or years before the property is finished and ready to inhabit.

As HMRC assumes the gain on the sale of your property accrues equally over the period you have owned it, a large part of the gain may be allocated to the period before you were able to move in.

If you purchased your home ‘offplan’, we should review your purchase contracts before you sell the property. If the contract contained conditions which introduced break points in the agreement to purchase, the ownership period may be calculated from a different date, which will reduce your taxable gain.