Query re Calculating CGT on Property

SissyB123

Hi,

I hope someone can help.

I'm trying to complete my self assessment tax return.

I sold my home last year. It was my only property and I lived in it for most of the time I owned it but there is a potential CGT liability as it was let out for a couple of years whilst I was traveling overseas. I think I am OK with how to calculate the Private Residence Relief and Letting Relief generally but am confused about what the acquisition cost should be.

I bought the house as a joint tenant with my then partner but a year later we split up and I bought his share off him and took over the mortgage. So essentially I paid him his half of the equity at that time.

So is the acquisition cost:

a) the original purchase price when I purchased the house with my then partner?

b) half the original purchase price (because I purchased it jointly) plus the amount I paid him to transfer the title into my name a few years later?

c) or for these purposes did I only acquire the property when it was transferred into my sole name? In which case what was the acquisition cost? The amount I paid to cover his share of the equity?

Would really appreciate some guidance on this. I have been searching online for hours but with no luck.

Thank you

Davide123

I would say b

looks like you may not have to claim lettings relief, (only ppr which should cover it) if you only let for 2 years

00ec25

option b

also have you checked the rules about periods of absence since you were away "travelling" and then returned to live in it you presumably did not have another home during that time. Lettings relief may not be needed as it may be wholly covered by PPR under the less than 3 years absence rule

jimmo

I disagree with the above.
The cost of your total acquisition will be:
Half the original purchase cost
Plus (1) the amount you paid your former partner
Plus (2)the amount of mortgage liability you released him from.
http://www.hmrc.gov.uk/manuals/cgmanual/cg14500.htm

holly_hobby

The 2 yrs let period MAY come under PRR, depending upon where within your ownership this period occurred (as i can't see any notes on how long you owned it for, at what point it was let out from and to, or if you re-occupied it pre sale.

If let within the last 36 mths of ownership, then the period is covered under PRR exemptions, and theres no CGT computation reqd.

IF it was sort of in the middle ie you lived there for 3 yrs, let it out for 2 yrs, moved back in for 3 yrs before selling (or any variation where the last 36 mths of ownership doesn't entirely encompass the let period), then some or all of the let period won't qualify for PRR exemptions.

BUT you will qualify for lettings relief (along with of course your annual unused cgt exemption, previously reported cgt losses, iimprovements costs, associated acquisition, disposal and professional fees (not those related to cgt reporting).

PRR qualification re being abroad, would only apply if this was connected with your job, and the property was both pre and post return to the UK your primary residence, this will help - http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#2

With regards to working out acquision, Jimmo is correct, its a 2 part calc, the actual value of your share at pch gives you part 1 of your cgt calc PLUS part 2 is in respect of purchasing his share ....

If the pch is treated as an "at arms length" transaction, it will be any monies & mge debt transferred = the consideration (or acquisition cost),http://www.hmrc.gov.uk/manuals/svmanualnew/SVM107100.htm.

Additionally if the TOTAL consideration to ex partner exceeded 125k (nil rate SDLT threshold) there was a SDLT liabiity that may need addressing if not already satisfied.

Hope this helps

Holly

SissyB123

Thanks for your responses. They are a great help. It makes sense that the release from the mortgage should be taken into account.

I wasn't abroad for my job. And some of the letting period falls outside the final 36 months so I will have to claim Letting Relief - on my calculations it wipes out the gain so hopefully I've got that right.

Now I just have to work out how to fill in the form ...

Thanks again.

holly_hobby

Good .... did think it was worth making it clear that only the last 36 mths of ownership is disregarded whatever the residency, for PRR purposes.

And as it stands you say your letting period overlaps the final PRR exemption period, to which you'll apply lettings relief.

Just be careful, the maximum amount of Letting Relief due (which is per benefical owner) is the lower of:

£40,000
OR
the amount of Private Residence Relief due
OR
the amount of gain you've made on the let part of the property

Followed by the other reliefs etc, and finally apply your unused annual cgt allowance, which will be £10,900 for you.

Reporting is via annual self assessment cgt pages - these notes may help http://search2.hmrc.gov.uk/kb5/hmrc/forms/view.page?record=OSWvtKIMh2c&formId=3187 - have a hunt round on HMRC etc, pretty straight forward TBH

Hope this helps

Holly xx

jimmo

holly_hobby wrote: »

PRR qualification re being abroad, would only apply if this was connected with your job, and the property was both pre and post return to the UK your primary residence, this will help - http://www.hmrc.gov.uk/cgt/property/sell-own-home.htm#2

No, no. An absence of up to 3 years for any reason can be claimed. Its in your link under the heading “ Living away from home”
Under “Working away from home “ absences working abroad are unlimited whilst absences working in the UK are limited to 4 years.

SissyB123

I was actually absent for more than three years in total - the letting period and then a period after that. Can PRR apply for three years of a three and half year absence or does the relief simply not apply.

I had assumed that if you were absent because a property was let then the letting relief would apply rather than the absence provisions (since you are by definition absent if the property is let) but in any event I don't think it matters in my case as on my calculations letting relief exceeds the gain.

Have I got this right? I have simplified the figures!

Property owned for 10 years with a gain of £200K
Property let for 2.5 years of which 1.5 years was within final 3 years so only 1 year is not covered by PRR.
So PRR of £180K applies (1st 6 years and last 3 years = 9 years out of 10) leaving a remaining gain of £20K
Letting relief is the lowest of:
a) PRR = £180K
b) £40K
c) Amount of gain attributable to period let = 2.5 years out of 10 = £50K
So letting relief is b) £40K against a gain of £20K. I assume the £10,900 allowance would also be applied at this point if needed.

Thanks again for your help.

00ec25

your calculation is off as at c) you have overlapped the 36 month rule and the let period but the end result is the same, no tax payable

you state you owned it for 10 years of which only 1 year is not covered by PRR:
PRR 200x 9/10 = 180
letting relief
a) PRR of 180k
b) 40k
c) gain during let period (not already covered by PRR) 180 x 1/10 = 20

lowest letting relief 20k
taxable pain: 200 - 180 - 20 = 0
personal allowance unused