CGT Relief

Loanarranger

Our mother died earlier this year and my brother and I discovered that she had transferred her house into our joint names in the early 1990s.

The house was downvalued at £200,000 in May to reflect the rundown state of the property. We are now spending a considerable amount of our own time and money in upgrading the house by gutting the kitchen and installing new units, likewise with the bathroom. The whole property is being redecorated inside and there will be new carpeting throughout. Our intention is to put the house on the market in the Spring.

There will also be structural work required to a bathroom extension, this is NOT going to be covered by buildings insurance. Finally there are two double glazed sealed unit windows which may have to be replaced depending on the results of the homebuyers report.

We anticipate total costs of up to £20,000 for all works and as we are both homeowners with our own properties there will be CGT payable when we sell the property.

What I need to establish is whether any of our expenditure can be offset against the CGT we have to pay.

Many thanks in anticipation of advice received.

Rolo_Tomasi

Yes it should be. Make sure you keep evidence (ie receipts) of all the expenditure. The cost for CGT purposes will be the value of the property when it was transfered to you plus the cost of any enhancements.

Did you not have to sign anything when the property was transfered to you? I take it your mother was living rent free in the property - did anyone ever mention pre owned assets rule?

CLAPTON

the cgt will be based on the selling price less the value at time of transfer... you will need to determine the value when transferred... do bear in mind that it will be a low price to take in account that the house had a sitting tenant (i.e. your mother)

you can offset the cost of improvements to the property but no repairs... a rather difficult issue

Loanarranger

Thanks for the replies. We did not have to sign anything though I can vaguely remember her telling us at the time she signed it over. We always looked upon it as being her house and if she hadn't mentioned it we would not have been any the wiser. Accordingly she did not pay any rent and no, the pre owned assets rule was never mentioned and I have never heard of it.

Apart from the actual expenditure incurred is there any means by which we can claim for what must be hundreds of man hours spent gutting and redecorating as we have tried to do as much as possible ourselves rather than employing tradesmen unless absolutely neccessary.

Rolo_Tomasi

You cannot 'claim' for your own time. If you think about it, if you did then this would be income to you and therefore you would have to pay tax on it.