I've tried to include as much relevant information as possible, but let me know if you need more information.

In early 2005, our neighbour died intestate and owned an unregistered property (B) that adjoins our registered property (A). B was empty for a year while the remaining kin were found.

In late 2005, because we had helped the neighbour for several years and B needed modernising, our neighbour's relatives kindly offered B to us for £70,000 (which was probably about £15,000 - £20,000 below the true market value).

We bought B from the PR of our neighbour in early 2006 and decided to do incorporate B into A to make a much larger, single property. It was purchased by way of a further mortgage advance to A (the mortgage and registration of A are held jointly in mine and my wife's name).

The contract and TR1 for buying B was signed in my name only. B is still not registered with the Land Registry as we were going to amend our existing registration once the alterations had been completed.

Because it was not secure, I lived in B for about three months and commenced some of the more urgent external renovations which were not dependent on the internal layout, e.g. windows and doors, outbuildings, etc. whilst we finalised the plans for the proposed internal work.

While this going on, my teenage daughter unexpectedly announced she wanted to get married and asked if they could possibly buy or rent B. We therefore abandoned the planned internal alterations and updated B as it stood for them. It was decided that they could live in B and pay a monthly amount as an “accumulating deposit” until they were in a financial position to get a mortgage themselves and buy B outright.

The work to renovate B cost about £10,000 on paper, although I did do some of the work myself and called in a lot of return favours to help get B finished on time, so the real cost was nearer £20,000. They moved into it in September 2006 and have been paying towards their deposit since then.

In May 2007, My wife got a job abroad and we moved overseas. She has not returned to the UK since then. We liked the new country and so decided to definitely sell A and B and stay/buy overseas.

In Nov 2007, I returned to the UK to complete remedial work to A and B and finalise the sale of both of them. Therefore, I lived 7 months abroad and 5 months in the UK of the 07/08 tax year and have until now, stayed in the UK for 4 months of the 08/09 tax year and will leave in August (5 months).

Our daughter and son-in-law are now in a position to and want to purchase B outright for about £120,000 and have already paid £12,000 through their monthly payments . We have also had an offer on A, although this will take a few weeks before completion.

Due to ill-health, my income for the last three years has been below the UK tax threshold and I had no earnings while living abroad.

We would have liked to gift some of B to our daughter, but can no really afford to because the Sterling exchange rate has plummeted since we first went abroad and so we need to raise as much as possible from the property sales.


What is our potential CGT liability in the present situation and would it be better to transfer ownership of A or B to both of us or just my wife before their disposal, as she is living abroad and has no plans to return to the UK. Could we reduce the selling price of B to offset the amount spent on it which is not reflected in physical receipts? Because I lived in it shortly, could I claim it was my main home? Will the tax man regard the money they have already paid as rent?

Any expert advice would be gratefully welcome as my head is spinning deciding what to do. We didn't realise at the time that by trying to help our daughter and ensuring they had a “nice home”, we could possibly end up with a large tax bill. I understand now after reading some of the posts, that if we had gone ahead with our original plan for a single larger house, it would have been classed as our main property and so be CGT exempt. TIA