Capital Gains Tax query

Horseygirl123

Hi

My husband and I sold a property a year ago. He had inherited it from his father in 2000 and it had been rented out until summer 2013.

My husband is self-employed and has an accountant do all the books. He vaguely remembers the accountant muttering something about CGT when he last went over the books. Now he wants to see us about CGT on the property.

The house was worth approximately £50,000 - £60,000 (according to Zoopla) in 2000 and we sold it for £75,000. It was in joint names.

Do we have anything to pay? Seeing the accountant next week but want to be prepared for any shocks:eek:

Thanks.

kidmugsy

If neither of you had any other capital gains in that tax year you may not have much to worry about. From the £75k subtract any legitimate expenses (as outlined by your accountant: you'd better take your records along to show cost of improvements, of selling, etc). From the result subtract the £55k (or whatever) that was its value in 2000. There you have the capital gain. But for how many people?

Now comes the bit where you need to be careful: how did it morph from "He had inherited it from his father" to "It was in joint names"?

Do you mean, for example, that you owned it as Tenants in Common, 50:50, after your husband gifted half to you? Or do you mean something else?

Horseygirl123

Thanks for your reply.

It was only when we decided to make a will in 2011 that the solicitor discovered the house was still registered in his father's name at the Land Registry. As I am a non tax-payer our accountant advised to put it into joint names.

Laurajo_2

Do you have the probate value of the house? I suspect this will need to be quantified - as you will probably know, zoopla can be quite a bit out.

I believe where an inter spouses transfer takes place, you will inherit your husbands base cost.

Presumably your husband never lived in it during his time of ownership?

holly_hobby

Hi,

Yes there will be CGT exposure on this, but that doesn't mean there will actually be any tax to pay (and I take it you have never lived there since ownership).

As you know you need to determine the MARKET value of the property at the date of Fathers death (which should have been done as part of probate, to establish any IHT considerations).

If there is no record of that, you could try this right move link - http://www.rightmove.co.uk/house-prices.html, pop in the address and it will reveal what properties have historically sold for in the chosen area, it does go back a good few yrs, but whether it will reveal 2000 prices I don't know - check it out - get examples of identical/similar units, print off and retain for any HMRC inspection.

If you want HMRC to further check the value you will base your CGT computation on, you need to complete and submit this form http://www.hmrc.gov.uk/forms/cg34.pdf and submit it BEFORE you submit your CGT return, and it takes upto 2 mths for they to repsond. (I would expect you accountant to be telling you this too).

Once you have established the market value and gross gain, you then start deduction of permitted cosings, such as improvement (not general maintenance), acquisition and disposal fees (such as estate agt marketing etc), professional fees (but not those associated with the actual CGT return), any prev reported CGT losses.

To the remainder, you then apply your annual unused CGT reliefs against your individual share of the gain, which is £10,900 per beneficial owner. (2013/14)

CGT is reported on an individual basis under your own Self Assessment return (property pages), and is fairly simple, but again your accountant should guide.

Tax on any net gain is 18% for basic rate payers and 28% for higher rate tax payers.

* IF you have lived in the property at any point post 2000 (ie during your ownership), there will be further reliefs under Primary Residence Relief (PRR), and lettings relief - which can be expanded on if necessary.

Hope this helps

Holly xx

Horseygirl123

Thank you all for your advice. Very helpful.

Holly hobby, I checked the link. Similar house prices for that area in the year 2000 sold for between £40,000 - £60,000 so quite a big difference.

The house was never valued - I assume because my husband was the only beneficiary in his father's will.

I'll complete those forms you suggested prior to seeing the accountant.

Thanks again for everyone's help and advice:A