Capital Gains Tax help required please.

villain

A family member is in the process of selling a commercial property (a shop) that she has owned for over 25 years. Due to various reasons, we have been unable to determine the price she paid for it. The shop is being sold for £250000.

In calculating the likely Capital Gains Tax bill, do we need to know the actual acquisition cost, or do we use some sort of "base cost".

Also, if she has already used her Capital Gains Tax allowance and will pay tax at 40% on this disposal, is there likely to a large saving in tax if we postpone the sale until next Tax Year?

Petmidget

I have assumed in this answer the shop is being traded from, if it is a commercial let some of my points may not be relevant.

As the shop has bee owned for 25 years, this would automatically be rebased in 1982. Though as that is only 1 year after purchase the amout would be similar. In the first instance you would place a value in the calculation, this would be agreed or challenged by HMRC and possibly passed to District Valuer for an opinion. Of course it would greatly help if you had evidence to support your valuation.

Then there would be indexation for full period upto 1998 in effect doubling (plus a bit) the 1982 value, then taper relief of 75% (assuming it all qualify for business rate) on the remainder.

If you postpone until 6 April 2007 to free up an allowance you would save roughly £3700 assuming she is a 40% taxpayer.

Other things to consider. IMO

Can the ownership be split tax efficiently prior to sale;
Is the whole shop liable to CGT, any fixtures etc that come under IT rules, any accomodation that qualifies for PPR;
Any scope for Rollover Relief depending on plans for cash;
Have any capital improvements been made to affect the base cost;
Does she have any assets with pregnant losses to potentially offset;

You need some good quality professional advice on this before moving forward, selling a business is a lot more complex than a more basic asset and has a lot more avenues for tax reduction and a lot more pitfalls.

villain

Terrific answer, thanks.