Capital Gains Tax

silvercar

1) indexation tables show you how much to "uplift" the initial value by, depending on the month of purchase. See here:

http://www.hmrc.gov.uk/rates/cgt.htm

scroll down and see the May 1991 figure is 0.218.

2) 10 years or more ownership from early 1998 gives the maximum 40% taper relief. Taper relief starts at 5% for 3 full years ownership and increases by 5% for each extra year until you reach a maximum of 40% for 10 years. 40% relief leaves you with 60% of the gain.

Both these reliefs have been withdrawn for sales made after 5 April 2008.

jimmo

Silvercar is correct on both indexation and taper and the facts that she has confirmed my figures for both should give you some confidence. However here is a link to the guidance notes that will come with the Capital Gains pages of your Return. That explains both indexation and taper.
http://www.hmrc.gov.uk/worksheets/sa108-notes.pdf
Its only a very small point but strictly she is wrong when she refers to “taper relief.”
Taper is Taper and in your circumstances you are entitled to 60% Taper. Obviously mathematically 60% taper is the same thing as 40% taper relief and many people find it easier to understand taper relief but the links I post here are all to the HMRC which uses the legally correct terminology.
To question 3 the answer is yes, you must describe the asset you have transferred. Please don’t try to be too clever, just explain, as you have done here, the circumstances.

stardust23

Top show, guys !

Some final questions (I think) :-

1) It states that one need only put the market value at disposal if the disposal was to a 'connected person'. By the definition given by HMRC, my ex-girlfriend is not a connected person - is that correct? If so, then can I put the disposal proceeds value which was less then the half-share of the market value?

2) If there is a loss, which would be the value (from your spreadsheet) that one takes forward to subsequent years? Non-exempt Gain, Tapered Gain, or Chargeable Amount?

jimmo

Nice try but no cigar I fear.

I am afraid that the transfer to your ex-girlfriend is likely to be a bargain made not at arms length and the market value rule applies. In the SA108 page 15 it refers to “Use the market value in place of the price you received if you gave an asset away, deliberately sold it for less than its full value, or disposed of it to a connected person.”
In those terms you come under deliberately sold it for less than its market value.
You may not think that is entirely appropriate to you but this is where tax really does become personal.
You started off by saying you transferred your share. OK you didn’t exactly say it was a gift. Now you have mentioned disposal proceeds but haven‘t given much away on how much they were.
In very rough terms, if it was an amicable settlement with your ex-girlfriend, then the market value rule will apply. If it was a fiercely negotiated settlement then you could argue that it was an arm’s length transaction and the market value rule does not apply.
At this stage I won’t answer your questions on losses because my gut feeling is that you have absolutely no chance of establishing a loss.
I could be wrong but how much are you prepared to publish?

stardust23

This is where Tax and the real world seem to come into conflict.

It would appear that CGT assumes my share is based on the gross amount (market value divided by 2) but in reality my share is based on the net amount or equity (market value minus mortgage balance divided by 2).

CGT assumes my share is £122,500 but in reality it is £90,000, and it took nearly two years of negotiations and finally solicitors and a court application before the amounts were agreed. So I believe it would be completely wrong if HMRC felt that I had "deliberately sold it for less than its full value".

(I thought the terminology I had used was correct - that is, I transferred my share of the house to my ex-girlfriend and received proceeds from the disposal of said asset.)

jimmo

To be honest when I first saw your last post I thought you were having a go at me and decided to give it a bit of time before I replied and see if anyone else joined in.
As they haven’t it seems like you’re stuck with me or professional advice.
As far as I am concerned your reply is actually perfect in the sense that you actually received money for the disposal and the amount you received was subject to intense negotiation.
However, where you may have fallen down is that the consideration you have received is £90,000 in cash plus the release of your share of the mortgage debt.
Does that make sense? If you buy a house for £50,000 and sell it for £150,000 then you make a gain of £100,000. The mortgage doesn‘t come into it.

stardust23

Thanks, Jimmo. Believe me I wasn't having a go. You have been a great help.

Did I read somewhere that putting in Double Glazing was not considered an 'improvement' but a 'repair' ?

jimmo

I am afraid you did. Many years ago only posh people could afford double glazing (and those who wanted to appear posh). It was definitely an improvement.
As time went by double glazing became progressively cheaper in relative terms to the extent that if your windows were rotten and needed substantial repairs it became cheaper to replace them with double glazing than to have them repaired so the taxman’s attitude eventually changed.
You bought the house in 1991 and, definitely then, double glazing was regarded as an improvement.
You disposed in 2008 and, definitely then double glazing was regarded as a repair.
Two points.
1) I can’t remember the date when the attitude changed but I think it was relatively recently.
2) If I was still working and your Return, where you have to declare this, landed on my desk then it would be a 99.99% chance that I would take it up for Enquiry.
Sorry, that’s just the way it is but if you are prepared for it that’s better than it coming out of the blue.
When was the double glazing installed and how much did it cost? Did you have it done because your old windows were worn out and it was the cheapest option?

stardust23

The double glazing was installed in 1992 and cost about £1,200 because we installed it ourselves. So I would only claim £600 which I don't believe is particularly unreasonable.

jimmo

That seems entirely sensible to me but if you do get picked up on it just remember that in the early ninties this was regarded as an improvemrnt.