help with Capital Gains Tax!

spenny99

My wife is a GP who is being relocated into a polyclinic next year. She currently co-owns the present surgery (extended 1930's house) and we are not sure what happens when we come to sell the surgery next year. It has a big mortgage on it (about 75% LTV) but there would be still be some profit from the sale. What rate of CGT would she be liable to pay and is there any way of reducing it. She is self-employed, does that make any difference.
Any information would be gratefully received.

Spenny99

Pennywise

Forget the mortgage - capital gain is the difference between purchase price and sale price (less legal and agents fees and less any property improvements). If she owns it jointly, then the gain is apportioned between owners in proportion to their ownership.

She has an annual CGT exemption of ~£11k to reduce the gain further as long as it's not used on other gains in the same year.

If she's "traded" from the premises, then she should be eligible for entreprenneurs relief which means only 10% CGT on the gain instead of the main rate of 18/28%. Whether she qualifies as "trading" will depend on the narrowly defined rules by HMRC and how they match her position, i.e. is she self employed or employed by the NHS and if self employed, does it fall within the "trading" definition for entreprenneurs relief.

No doubt she has an accountant dealing with her accounts/tax affairs - she'd be better asking her accountant who will be in possession of the details and will be able to give a more definitive answer.

ceeforcat

Pennywise - doctors are a law unto themselves where tax law applies. The op is a GP and, as such, is 'employed' by the NHS but is completely regarded as self-employed by HMRC (except when it comes to pensions when they are members of the NHS scheme but must pay both employers and employees contributions for themselves based on their NHS proportion of profit) It appears that the op owns the surgery and, presumably, is paid a cost rent by her local trust (or whatever they are called now). (Unbelievably this cost rent is also classed as pensionable earnings - told you the rules were different!)

Everything that you have said about the CGT position applies as for any other 'trader'.

There aren't many accountants who would necessarily have this knowledge and advice from one who specialises in this area is strongly advised.

Pennywise

Doesn't the payment of rent jeopardise/restrict the entreprenneurs relief?

ceeforcat

Absolutely Pennywise. I only mentioned it as I presumed that the op would be aware that this would be ceasing upon the sale of the surgery with the resultant loss of pensionable income.

spenny99

many thanks Pennywise, she does have an accountant but they have made so many small mistakes over the years I thought it wise to get a bit of info from here. Everything to do with Doctors seems to be complicated and confusing!! Will dig deeper into finding an accountant with perhaps more expertise in this area.
Thanks Spenny

ceeforcat

Just as a thought as I see that you reckon there will be 'some profit' on the sale. Commercial property is pretty much in the doldrums (where I am anyway) and I have noted that some doctors are retaining the property as they see this a bad time to sell. As Pennywise points out, this would rule out entrepreneurs relief but, as most cost rent reviews are on an 'increase only' basis, I think that you should consider all of your options.