CGT and PET

Bargainetta

Does anyone know how I stand on this. Dad passed a house on to me in 2002 on a seven year Potentially Exempt Transfer ending 2009. In all that time until now it has been rented out to families on Housing Benefit so should qualify for letting relief. Increase in value 82,000 but, obviously, that is not clear profit. The house has had a new kitchen, bathroom, doors, boiler x 2 etc. Does anyone know how to calculate for CGT and is the PET relevant at all?

00ec25

Have you personally ever lived in it whilst you were the owner? If not then you do not have any entitlement to letting relief - the fact your tenants were on benefits has nothing at all to do with letting relief, that relief relates wholly to whether it was once your main/only home

The PET relates to Inheritance tax , you are asking about CGT so yes the PET is utterly irrelevant in terms of your CGT

have you claimed any of the costs lists against your profits to date? Without further details it is possible that "doors" may be deemed to be a repair rather than a capital expense and so would be disallowed against your CGT

as for the calculation:
CGT payable = increase in value - buying and selling costs (eg Estate Agent and legal fees) - costs of capital improvements - personal allowance (£10,900) x 18% (if basic rate tax payer ) or x28% if higher rate payer)

getmore4less

who got the rent?

holly_hobby

If Dad has continued to benefit from the property (ie share of rental income etc), and his estate on death exceeds the available nil rate exemption, then the gift is not exempt, does not meet PET regs, and will fall foul of Gift With Reservation regs.

However, if ALL benefit ceased when it was transferred to you, then yes, it is now classed as an exempt gift, and will be competely ringfenced from the valuation of Dadss estate on death.

CGT is a tax you are liable for upon disposal.

It is based on the difference between the disposal sum and (as a connected transfer) the market value at receipt, less available exemptions, reliefs etc.

If by the time of disposal (which I am not clear has happened or if this is a hypothetical question), the property will have never acted as your primary residence, you qualify for only 1 exemption, your annual unused cgt exemption (£10,900 2013/14 rising to £11,000 2014/15), plus any previously reported cgt losses, improvement (not maintenace costs, which are an income tax deduction), acquistion, disposal and professional fees (but not those associated with the actual CGT return itself).

If you do reside in it as your primary residence at any point prior to disposal (which must be accurate and supported by evidence if asked by HMRC), then you will qualify also for lettings relief (max of 40k at current rates) and associated PRR exemptions.

You may want to engage your own tax practioner to assit and guide you.

Hope this helps

Holly