CGT ex family home

ddothugh1

I shared ownership (50/50) of a family home with my wife for 10 years (1997-2007).
I lived there for the 1st 2 years then moved out leaving my wife and children in the house for the remaining 8 years after which it was sold. As part of the divorce settlement (which took into account my own home/assets/pension, etc) the court ordered the financial proceeds from the sale of the property were split approx 80/20 in my ex wife’s favour. I accept I am due to pay CGT as I was non-resident in the property for some time. However, the tax office have told me that I must declare 50% of the financial gain on my Self assessment as I owned 50% of the property, even though I only received approx 20% financial gain from the sale. Can anybody advise me please.

Stuart_Bellamy

The Revenue are correct that you have to pay tax on 50% of the gain despite only living in it for 2 of the last 10 years.

However as Jimmo is trying to work out you wil be due some relief for the fact you lived in the property as your main residence for a period of time.

You will also qualify for non-business asset taper relief and the CGT annual exemption.

Are you having to put this on your 2007/08 tax return by the end of this month?

Stuart Bellamy

ddothugh1

Thanks, appreciate your replies. Yeh this is my tax return and needs to be submitted at the end of the month. I have done the self assessment on-line but havn't submitted it yet.

Family Home purchased May 1997. My wife and family remained until it was sold april 2007, the year of our divorce.
I moved out Jan 2000 into rented accomodation.
Bought my next home (in my name only) Aug 2001, moved in immediately and still reside here.

Was kind of hoping that as I only recieved my share of the proceeds from the sale after it was split, then I didn't actually receive the 50% that the tax office is telling me is subject to CGT.

Thanks again

ddothugh1

Thanks again Jimmo. I'm not up to speed on tax issues. I'll reply with figures asap but for now I thought I just had to submit my return by the end of the month. Are you telling me I must also pay any amount owing by the end of the month? If this is the case I would do that. Are there any restrictions on how/when I ammend a return?

ddothugh1

Hi Jimmo

I'll be paying the amount (?) owed before the end of the month, I knew I'd have a bill and being honest, asked for a SA form. They must love idiots like me!!

My situation is closer to the 3rd scenario you wrote in previous letter. My pension and current home were also taken into the equation and the % split was what the 'court' deemed as within the acceptable range.
I received £21202 from the sale!!

Home purchased May 1997 for £79k
Purchase costs £1864
Home sold in April 2007 for £225K
Redemption of existing mortgage £50810
Sale costs £398.

Thanks
Dave.

ceeforcat

Well, I will have the first go:

Sale proceeds : £225000
Less costs of sale: £398

£224602

split 50:50 £112301

cost (79000+1864)

split 50:50 £40432

Unindexed Gain £71869

Indexation:
(assumed purchased April
2007 – need exact month)

£40432*0.04 £1617

Gain before relief £70252

Private residence relief

x 5/10 £35126

Chargeable before taper £35126

Tapered Gain (10 years)
60% £ 21075

less annual allowance £9200

Chargeable at 20% or 40% £11875

There – my head is truly on the chopping block. We need the exact month that the house was purchased to provide more accurate figures but it looks to me that your bill will be around £2375 if a basic rate taxpayer or £4750 if higher rate.

P.S. Surely your costs of sale were more than £398? Solicitors, estate agents etc.

ddothugh1

Thanks folks

The contracts for the purchase were exchanged on 7th April 1997 and 27th May 2007 for the sale. The sale costs should be £627.13. forgot the estate agents fees. Unfortunately I'm higher rate and the figure you gave is pretty close to what my SA indicates so I must have done something right.

So is it right the tax office have told me that I must declare 50% of the financial gain on my Self assessment as I owned 50% of the property, even though I only received approx 20% financial gain from the sale??

ceeforcat

I can't add any more to this argument other than what jimmo had said previously - declaring 20% fraught with complications. Not sure what stage you are at in your ancillary relief but it may be worthwhile going back to the judge and pointing out that your share of the house had a CGT liability which was not factored in and the reasons why (if you had only owned 20% there would have been no liability!) I don't hold out much hope though.

ddothugh1

Woz just hoping maybe someone knew something I didn't. Thanks for your time. appreciate it.

ddothugh1

Thanks Jimmo
A local estate agent does a very basic but great deal of less than £200+vat then tries to sell other services, which we didn't buy, hence the low price.
I'll go over my SA prior to submitting. My figure comes closer to ceeforcat's, so i'll spend some time on it first then cough up. I'll still seek advice but tread carefully, if I find anything groundbreaking I'll post it, there must be someone else in a similar situation.
Many thanks for your time

ceeforcat

Unless you do not pay tax at 40% the calculation by jimmo is more accurate than that prepared by me earlier - I did not calculate according to the months of purchase and sale as he did.