Self Assessment - CGT on jointly owned house

BlueVinney

I've previously been helped in this forum with the calculation of CGT due on a house that my wife and I jointly bought, occupied and then let. I'm now having difficulty completing the 2011/12 self assessment submission and so would be grateful for some more help. All figures below are approximate.

My problems stem from the shared ownership of the property and how the amounts should be shown on the returns. The net gain on sale of the house was £85k, it was owned for 137 months and PPR can be claimed for 59 months.

Calculation 1 – calculate on total gain and split the cgt liability 50/50.

PPR is £37k and Letting Relief is £74k (2x lesser of £37k or £40k) leaving a taxable gain of £-25k! So no CGT due but apparently no way to link the detailed calculation sheet to both returns or cross reference both returns. I guess it could be shown as a 'narrative' calculation but not sure if this would be acceptable.

Calculation 2 – split the capital gain on 50/50 ownership and calculate cgt liability individually.

For each return the capital gain is £43k and PPR is £18k with Letting Relief of £18k leaving a tax liability of £7k. This again leaves no tax due as we have unused personal cgt allowances.

Any advice on the accuracy of my assumptions and calculations and how to enter the information on our individual returns would be gratefully received.

Thanks

CLAPTON

I don't understand your figures

exemption are

1. PPR i.e. period of actual residence

2. last 3 years

3. letting relief

could you list these separately

00ec25

method 2 is the correct one, you split the gain according to ownership and are then taxed individually with each person deducting ppR and letting relief from their share of the gain. (if everyone did methiod one it could not cope with situations where ownership was not 50/50 since the gain would not be the same for each person so their tax cannot be the same

As you have found out this does mean that because you did not live there long enough for capped letting relief to be > PRR, you each end up with a small net gain. However in your case this is covered in full by your 10,600 personal allowance (assuming you have £7k left in unused allowance this year )

for Clapton's benefit

gain 85
splt to each person 42,500
PPR 42,500 x 59/137 = 18
Lettings (137-59)/137 x 42.5 = 24 therefore capped at PPR of 18
42.5 - 18 - 18 = 6.5 net taxable gain
6.5 - allowannce 10.6 = nil tax payable