THE boss of a leading accountancy firm today fired a warning shot across the bows, after government chiefs began the final countdown to the introduction of a new policy which will affect thousands of people.
From April 2020 homeowners who move out of a property and into a second home will have just nine to months to sell it - and if it goes under the hammer after that period has elapsed, they will face a hefty capital gains tax bill.
That could spell disaster for many people moving to Cumbria to plug the skills gap, says accountancy firm boss, Paul Hornby, who added the move may actually deter skilled professionals from moving to the county.
He said: “It is quite conceivable that an individual, couple or family may be in the fortunate position where they can buy a new home in Cumbria without the need to sell the property in which they are based to fund the move.
“But under the new revised legislation, if they fail to sell their old home within the nine-month timescale, they could face an enormous capital gains tax bill.
“My concern is that in a county where the economy relies upon workers from elsewhere in the UK to plug the skills gap, we may suffer from a reticence on the part of potential employees to take the risk of moving.
“Any financial gain they might make through a new job and cheaper cost of living could well be swallowed up if the housing market does not treat them kindly.”
Sweeping changes will be made to the capital gains tax regime from next year, with many new areas of legislation affecting property vendors.
It is the changes to Private Residence Relief which Paul believes will hit movers to Cumbria the hardest.
From April 2020, this relief will apply to the full period a taxpayer lived in the property as their principal, residence plus the final 9 months of occupancy (unless they can claim special circumstances, such as a disability or having to move into care). This is down from 18 months (and 36 in 2014).
What the change in law effectively means is that if a homeowners buys elsewhere and puts their former home on the market, it must sell within the nine-month period to be tax-exempt.
Paul said: “Perhaps the scariest thing here is that once again, the government has been woefully inadequate in their communication of this critical change.
“Time and again, we find ourselves having to deal with distressed clients, who have been caught out by a change in the tax regime which they had no awareness of.
“Storm clouds are gathering once again and I predict many people will be caught out by this unfair change in the system.”