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• FIRST POST
• POPPYOSCAR
• 14th Sep 17, 7:40 AM
• 11,113Posts
• 23,203Thanks
POPPYOSCAR
Could anyone tell me if I am working this out correctly please?

Second property bought 1987 sold 2017 so owned 30 years(360 mths) owned jointly.

Lived in for 9 years = 111mths

Rented out 15 years = 180mths

Bought for £70,000 sold for £600,000( gain £530,000)

PPR = 111+18 = 129mths 129/360 = 0.358
35.8% of £530,000 = £189,740

Letting Relief 180/360 = 0.50
50.0% of £530,000 = £265,000
Maximum allowed £40,000 x 2 = £80,000

PPR £189,740 + LR £80,000= £269,740
Gain of £530,000 - £269,740 = £260,260
less CGT allowance x 2 - £ 22.600

Total chargeable gain = £237,660

Assuming no other income

£237,660/2 = £118,830 gain per owner.

First £33,500 at 18% = £6030
Balance £85330 at 28% = £23892.40
Total CGT payable for each owner £29922.40

Thank you.
Last edited by POPPYOSCAR; 14-09-2017 at 9:06 AM. Reason: Adjusting Tax band
Page 2
• 00ec25
• By 00ec25 14th Sep 17, 7:54 PM
• 6,086 Posts
• 5,569 Thanks
00ec25
But the personal allowance cannot be offset against the Capital Gain so only 33,500 would be chargeable at 18%?
Originally posted by BoGoF
oops, early morning pre coffee post thinking of the 18/28% threshold, not the 0/18% one, yes you are of course correct
Last edited by 00ec25; 14-09-2017 at 8:06 PM.
• 00ec25
• By 00ec25 14th Sep 17, 8:03 PM
• 6,086 Posts
• 5,569 Thanks
00ec25
So the fact that it was owned for 30 years lived in for 9 rented for 15 leaving 6 years bears no relevance to the calculations?
Originally posted by POPPYOSCAR
because the gain is so large and the ownership period so long the letting relief is going to hit the £40k cap so in essence the 6 years will not impact the letting relief

the only way they would make a difference would be if the 6 years were a lived in period and thus could be added to your private residence relief which, as you know, is not subject to a cap. However, I assume you moved out to a new main residence after 9 years and the occupation of the new main residence is a matter of historic fact so you cannot now say the 6 years were main occupation of the old property as a main residence since it wasn't true.
• POPPYOSCAR
• 14th Sep 17, 9:07 PM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
because the gain is so large and the ownership period so long the letting relief is going to hit the £40k cap so in essence the 6 years will not impact the letting relief

the only way they would make a difference would be if the 6 years were a lived in period and thus could be added to your private residence relief which, as you know, is not subject to a cap. However, I assume you moved out to a new main residence after 9 years and the occupation of the new main residence is a matter of historic fact so you cannot now say the 6 years were main occupation of the old property as a main residence since it wasn't true.
Originally posted by 00ec25
Yes I know.

I just wondered why the question was asked about the other six years and wondered if it was relevant to the calculations which obviously it is not.

Yes the new house was moved into and the other one was not selling so it was decided to do it up and rent it out until the market picked up.

There is no intention to do that hence the calculation based on actual years lived there.
• POPPYOSCAR
• 14th Sep 17, 9:23 PM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
Thank you everyone for your replies, I am very grateful.

I have another question.

If say a third of the property is gifted ,not sold i.e. Value of £200,000 this would rise to a gain of £130,000 and the calculation would be made the same using this figure instead.?
• purdyoaten2
• 14th Sep 17, 10:03 PM
• 833 Posts
• 394 Thanks
purdyoaten2
Thank you everyone for your replies, I am very grateful.

I have another question.

If say a third of the property is gifted ,not sold i.e. Value of £200,000 this would rise to a gain of £130,000 and the calculation would be made the same using this figure instead.?
Originally posted by POPPYOSCAR
Presumably to a relative and ,therefore, a connected person. The 'gift' would be treated as at full market value - no difference made to your sums. However I am not following your new figures!

Earlier I had assumed that the letting period was reduced by the six empty years when it clearly wasn't and it is still fifteen. I hope I didn't confuse you too much!
Last edited by purdyoaten2; 14-09-2017 at 10:08 PM.
• 00ec25
• By 00ec25 15th Sep 17, 8:09 AM
• 6,086 Posts
• 5,569 Thanks
00ec25
I just wondered why the question was asked about the other six years and wondered if it was relevant to the calculations which obviously it is not.
Originally posted by POPPYOSCAR
if the six years is the sum of the time between the first letting and the last letting when it was not actually tenanted, but was, nonetheless, for those periods being marketed for let, then that can be counted as part of the letting period. However, as per the earlier calculations all that does is raise the letting period to 15/30ths and therefore the 40k cap still takes precedence.

if the 6 years were periods when it was not being marketed for let, and thus was genuinely a "second home", ie capable of being lived in by you but not your main residence at the time then that period is purely liable for CGT with either PPR or LR obviously

if some (all?) of the 6 years was periods when it remained your main home but you were absent from it for temporary reasons then some (3 year max) can be added to the PPR period under the absence rules. Alternatively if the reason for your absence was you were living elsewhere for work related purposes in work provided accommodation then of course those rules would kick in and the PPR period would also be increased.

hence the query about the "6 years"

There is no intention to do that hence the calculation based on actual years lived there.
Originally posted by POPPYOSCAR
in reality it should be done in months or days, not in years
• POPPYOSCAR
• 15th Sep 17, 3:04 PM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
Presumably to a relative and ,therefore, a connected person. The 'gift' would be treated as at full market value - no difference made to your sums. However I am not following your new figures!

Earlier I had assumed that the letting period was reduced by the six empty years when it clearly wasn't and it is still fifteen. I hope I didn't confuse you too much!
Originally posted by purdyoaten2
Yes to a daughter.

I am taking one third of the full market value i.e. £200,000 .less amount paid £70,000 should it be 1/3 of the price paid as well?

Are you saying the CGT would be based on the market value of £600,000 even though 2/3 are still being retained?
Last edited by POPPYOSCAR; 15-09-2017 at 3:06 PM.
• 00ec25
• By 00ec25 15th Sep 17, 3:31 PM
• 6,086 Posts
• 5,569 Thanks
00ec25
Yes to a daughter.

I am taking one third of the full market value i.e. £200,000 .less amount paid £70,000 should it be 1/3 of the price paid as well?

Are you saying the CGT would be based on the market value of £600,000 even though 2/3 are still being retained?
Originally posted by POPPYOSCAR
CGT obviously applies to the share being disposed of, so if that is 1/3, then the market value is 600,00 x 1/3 = 200k

the market value applies only on the acquisition or disposal from/to a connected person, so assuming your original purchase was not from a connected person then your purchase price is what you paid x the share % being sold obviously, which appears to be 70k x 1/3 giving you a gross gain of £176,669
Last edited by 00ec25; 15-09-2017 at 3:35 PM.
• jimmo
• By jimmo 16th Sep 17, 11:36 PM
• 1,913 Posts
• 2,374 Thanks
jimmo
Assuming your daughter is not a minor, if the idea is to gift a third to her and you will all then jointly sell the property that sounds suspiciously like Asset Splitting, Fragmentation or a combination of both.
It can, no doubt, be done but requires careful planning and timing HMRC are well aware of such tactics.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150p
The usual plan is to make the gift in one tax year and sell in the next.
In that way, if successful, the current joint owners would each benefit from the annual tax free amount and use of any available basic rate band and do the same in the following year.
The third, new, owner would only gain a similar benefit if the property value increased between the date of gift and date of sale. If you decide to do this you should really expect a hard time from HMRC and leave your daughter's share of the proceeds in her control.
• POPPYOSCAR
• 17th Sep 17, 11:10 AM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
Assuming your daughter is not a minor, if the idea is to gift a third to her and you will all then jointly sell the property that sounds suspiciously like Asset Splitting, Fragmentation or a combination of both.
It can, no doubt, be done but requires careful planning and timing HMRC are well aware of such tactics.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg18150p
The usual plan is to make the gift in one tax year and sell in the next.
In that way, if successful, the current joint owners would each benefit from the annual tax free amount and use of any available basic rate band and do the same in the following year.
The third, new, owner would only gain a similar benefit if the property value increased between the date of gift and date of sale. If you decide to do this you should really expect a hard time from HMRC and leave your daughter's share of the proceeds in her control.
Originally posted by jimmo
No that is not the idea.

Selling now is an option but daughter lives there and would like to stay there if possible.
• POPPYOSCAR
• 19th Oct 17, 8:36 PM
• 11,113 Posts
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POPPYOSCAR
The sale of the property is now going ahead.

If we complete by say end of november am I right in thinking that the CGT will not have to declared until the tax return 17-18 and paid when that return is due i.e. end January 2019?
• purdyoaten2
• 19th Oct 17, 9:25 PM
• 833 Posts
• 394 Thanks
purdyoaten2
The sale of the property is now going ahead.

If we complete by say end of november am I right in thinking that the CGT will not have to declared until the tax return 17-18 and paid when that return is due i.e. end January 2019?
Originally posted by POPPYOSCAR

That would be correct.
• settingsun
• 30th Oct 17, 8:27 PM
• 19 Posts
• 12 Thanks
settingsun
I have a very similar stuation to the OP, except I have not sold yet and did not purchase till about 10 years later. The CGT I worked out is about 40k if I sold now. For the time being I have assumed I can claim for major works I did in the first 10 years I lived there (3 new bathrooms, and a kitchen, roof, painting, garden walls, boiler, Drive) This all comes to about 40k but I dont think I can find any of the receipts from 20 years ago. I have videos of the kids doing a running documentary but I dont have the paperwork!

Presumably the HMRC are not going to take my word for it! Seems a naive question now I put it in writing, but it makes a difference of about 15k so thought I would see what you guys thought.

thanks.
• 00ec25
• By 00ec25 30th Oct 17, 8:34 PM
• 6,086 Posts
• 5,569 Thanks
00ec25
I have a very similar stuation to the OP, except I have not sold yet and did not purchase till about 10 years later. The CGT I worked out is about 40k if I sold now. For the time being I have assumed I can claim for major works I did in the first 10 years I lived there (3 new bathrooms, and a kitchen, roof, painting, garden walls, boiler, Drive) This all comes to about 40k but I dont think I can find any of the receipts from 20 years ago. I have videos of the kids doing a running documentary but I dont have the paperwork!

Presumably the HMRC are not going to take my word for it! Seems a naive question now I put it in writing, but it makes a difference of about 15k so thought I would see what you guys thought.

thanks.
Originally posted by settingsun
obviously you are expected to be able to support the cost you claim with paperwork if challenged,
have a read of Tobias Ridpath v HMRC (2013): " The Appellant could not provide any precise evidence about the expenditure incurred."
http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC02785.html
(of course if you have an "ordinary" name it is less likely HMRC will take you to "court" )

I'd also question whether all of that work was genuinely capital improvements? like for like replacement is revenue, not capital. Would you care to elaborate on the exact extent of the works?
Last edited by 00ec25; 30-10-2017 at 8:41 PM.
• POPPYOSCAR
• 30th Oct 17, 9:06 PM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
obviously you are expected to be able to support the cost you claim with paperwork if challenged,
have a read of Tobias Ridpath v HMRC (2013): " The Appellant could not provide any precise evidence about the expenditure incurred."
http://www.bailii.org/uk/cases/UKFTT/TC/2013/TC02785.html
(of course if you have an "ordinary" name it is less likely HMRC will take you to "court" )

I'd also question whether all of that work was genuinely capital improvements? like for like replacement is revenue, not capital. Would you care to elaborate on the exact extent of the works?
Originally posted by 00ec25
If I understand correctly in the case quoted it would appear that he did not declare the CGT and was found out by HMRC. Stands to reason they would look into things in more detail I would of thought?

Would HMRC take such an interest on modest expenditure on a large gain?
• Keep pedalling
• 30th Oct 17, 9:52 PM
• 4,719 Posts
• 5,206 Thanks
Keep pedalling
I have a very similar stuation to the OP, except I have not sold yet and did not purchase till about 10 years later. The CGT I worked out is about 40k if I sold now. For the time being I have assumed I can claim for major works I did in the first 10 years I lived there (3 new bathrooms, and a kitchen, roof, painting, garden walls, boiler, Drive) This all comes to about 40k but I dont think I can find any of the receipts from 20 years ago. I have videos of the kids doing a running documentary but I dont have the paperwork!

Presumably the HMRC are not going to take my word for it! Seems a naive question now I put it in writing, but it makes a difference of about 15k so thought I would see what you guys thought.

thanks.
Originally posted by settingsun
Adding new bathrooms would be considered improvements, but replacement boilers driveways wall, roof repairs and painting would not be.
• settingsun
• 30th Oct 17, 11:40 PM
• 19 Posts
• 12 Thanks
settingsun
I'd also question whether all of that work was genuinely capital improvements? like for like replacement is revenue, not capital. Would you care to elaborate on the exact extent of the works?
Originally posted by 00ec25
What happened was that the house we moved into had been extended but it was essentially unfinished and we had to do a lot of work over the 12 years we lived there. There was a leaking roof and leaking gutters, drive which you could not park on, a garden wall made of rubble. Then the bathrooms and kitchens needing fitting. We then moved and failed to sell it and went down the btl route. Since then we have treated all the maintenance as an expense e.g. painting and new shed.

We probably have some more bathrooms to redo soon after 23 years.

Could be all academic as I can't find the paperwork.
• 00ec25
• By 00ec25 31st Oct 17, 9:46 AM
• 6,086 Posts
• 5,569 Thanks
00ec25
If I understand correctly in the case quoted it would appear that he did not declare the CGT and was found out by HMRC. Stands to reason they would look into things in more detail I would of thought?

Would HMRC take such an interest on modest expenditure on a large gain?
Originally posted by POPPYOSCAR
whether "you" are picked on for a "detailed" examination does not later the fact the law says when making a self assessment tax return "you" are supposed to have the evidence to support it.

feel free to search for other more specific cases if you want to better scope your tax evasion "opportunity"
• POPPYOSCAR
• 31st Oct 17, 11:21 AM
• 11,113 Posts
• 23,203 Thanks
POPPYOSCAR
whether "you" are picked on for a "detailed" examination does not later the fact the law says when making a self assessment tax return "you" are supposed to have the evidence to support it.

feel free to search for other more specific cases if you want to better scope your tax evasion "opportunity"
Originally posted by 00ec25

• Keep pedalling
• 31st Oct 17, 11:49 AM
• 4,719 Posts
• 5,206 Thanks
Keep pedalling
What happened was that the house we moved into had been extended but it was essentially unfinished and we had to do a lot of work over the 12 years we lived there. There was a leaking roof and leaking gutters, drive which you could not park on, a garden wall made of rubble. Then the bathrooms and kitchens needing fitting. We then moved and failed to sell it and went down the btl route. Since then we have treated all the maintenance as an expense e.g. painting and new shed.

We probably have some more bathrooms to redo soon after 23 years.

Could be all academic as I can't find the paperwork.
Originally posted by settingsun
You should be able to offset the cost of fitting out the empty shell of the bathrooms and kitchen, but fixing a leaking leaking roof is general maintenance, and you can't claim for garden features like walls and sheds.

Any work you did while renting out should have been treated as an expense against income so can't be claimed again to offset CGT.