CGT advice and calculation check please :)

skr80

Hi – Thank you all for your advice on other threads regarding CGT. I have had a good read through and think I have got it (mostly?) right for my calcs!

However, I would be very grateful if you could cast your experienced eyes over my calculations please and see if you agree. Its rather a minefield if never done before and unlikely to ever do again!

My parents had this property in 1993, and my wife and I bought 25% of it (25k) in 2001, and a further 25% (25k) in 2003 – at this time land registry records were updated to show all four of us on the document. My calcs are as follows:

main residence October 1993 to October 1999 = 72 months plus deemed occupancy period of final 18 months on the basis it was once our main home so total occupancy period = 90 months.

let period = November 1999 - Dec 15 = 193 months

ownership total check – 283 months

Gross gain 135000 - 26000 = £109000

Private residence relief: 109000 x 90/283 = £34664


letting relief: lower of a, b or c
a) PRR: 34664
b) gain in let period: 109000 x 193/283 = 74335
c) max allowed: 40,000
lowest = LR =a = £34664


net taxable gain: 109000 – 34664 (PRR) – 34664 (LR) = £39672 = £9918pp
CGT personal Allowance = £11100 x 4 = £44400

Me – Earnings of £36000
Wife – Pension of £9000
Parent 1 – state pension
Parent 2 - State pension

So £33300 (wife and parents allowance x 3) is within the CGT taxable income I believe

My earnings / taxable income would be £36000 (wages) - £11100 (CGT allowance) + 9918 (25% net tax gain) = £34818

My allowance is £31785. The difference taxable @ 28% is: £34818 - £31785 = £3033 x 28% = £849

So I think that in the circs in total I / we must pay a capital gains tax of £849? Having been employed I have never completed a tax return – I assume I need to do this for this year, once I get my P60 for 15/16 and enclose a cheque to HMRC? If so –would I need to include papers regarding purchases / sales / and working out, and I am assuming that there is no need for my parents or wife to declare the transaction to HMRC as no CGT liable for them?

Thank you very much for any replies / advice and suggestions.

Alex

silvercar

I understood that you only count the time that you have some ownership of the property. So your parents calculation would be basically as you describe above for their share only.

You and your wife's calculation start from when you have some ownership ie 2001 (or 2003 if that is when you officially went on the deeds) and from that time you look at the gain etc If I'm right then you have no PPR, no "last 18 months" and no letting relief as you didn't live in it as your main residence for any time that you had ownership. This has been purely an investment for you rather than letting a property that you once owned and lived in.

Pennywise

You also need to be aware that your base cost isn't what you paid for it if it's bought from a related party, it's what the market value would have been at that time. Was it really only worth £100k in both 2001 and 2003 - surely house prices increased over that time?

Even if it's right, your base cost is £50k, the amount you paid for it/market value, not the original base cost paid by your parents.

Your CGT comp will look completely different from your parents. You can't do a global comp and split it between people, you have to start with your own, individual sale proportions, cost proportions, and then claim reliefs based on your personal circumstances.

skr80

thank you for your advice - I will have another work out of figures for me and my wife.
Would I still use the total net gain or would it be 50% of that figure? When we bought the 50% in 2003, the flat was worth approx £85000 - its now worth about £135000. Do I deduct my parents allowances from my figures... little bit confused what figures to use to work out mine and my wifes fugures be truthful!

CLAPTON

the whole calculation seems incorrect but I may misunderstand the details here


could you be very clear about who actually lived in the property and when and who owned what share and when

and then we need to calculate the capital gain for each person separately

skr80

CLAPTON wrote: »

the whole calculation seems incorrect but I may misunderstand the details here


could you be very clear about who actually lived in the property and when and who owned what share and when

and then we need to calculate the capital gain for each person separately

Thank you. to clarify:

1. Parents lived there from 1993 - Nov 1999, the property was then rented out until December 2015.

2. We purchased a 25% share in July 2001, Flat value@ £60000, and another 25% in July 2003, at which time the flat was valued at approx £85000 (all 4 of us on land registry at that point).

The Flat is now worth about £138000 - approx £135 after costs and fees.
Thank you for your help.

[Deleted User]

.....................

skr80

Thank you - we gave our parents £25k in 2001, and a further £25k in 2003 - it was an appropriate / agreed amount at that time (yes - more than market value!!)

Its a small 1 bedroom flat that in 2001 was worth 60k, and in 2003 worth £85k....now approx £138k.

Not sure what figures I should be using to work mine out - is it 50% of ???

[Deleted User]

For sake of clarification, and preventing someone from repeating calculations:

You and your wife purchased a 12.5% share EACH at at cost of £12500 EACH in 2001 when the property was worth only £60000.

You and your wife purchased an additional 12.5% share EACH at a further cost of £12500 EACH in 2003 when the property was worth only £85000.

skr80

[Deleted User] wrote:

For sake of clarification, and preventing someone from repeating calculations:

You and your wife purchased a 25% share at at cost of £12500 EACH in 2001 when the property was worth only £60000.

You and your wife purchased an additional 25% share at a further cost of £12500 EACH in 2003 when the property was worth only £85000.

Yes - thats correct Purdyoaten2. To explain that parents needed the money, and we had a close family friend that required accommodation so we made a conscious decision to pay as much as we did - helping out both whilst maybe not making a sound financial decision (for us anyhow) at that time...

[Deleted User]

skr80 wrote: »

Yes - thats correct Purdyoaten2. To explain that parents needed the money, and we had a close family friend that required accommodation so we made a conscious decision to pay as much as we did - helping out both whilst maybe not making a sound financial decision (for us anyhow) at that time...

In both your and your wife's case it looks like the calculation for each is:

Sale Price £34500
less legal fees £750
Net Proceeds £33750

less cost £25000

Gain £8750 each - covered by annual exemption.

Unless there is some rule under connected persons (as both you and your wife are)_buying at OVERvalue - can't remember! Someone more expert than I will no doubt comment!

With your parents, using your figures the calculation for EACH is:

main residence October 1993 to October 1999 = 72 months plus deemed occupancy period of final 18 months on the basis it was once our main home so total occupancy period = 90 months.

let period = November 1999 - Dec 15 = 193 months

ownership total check – 283 months

Gross proceeds £34500 less costs £750 = Net Proceeds £33750 less purchase cost £6000 = £27750

Private residence relief: 27750 x 90/283 = £8825


letting relief: lower of a, b or c
a) PRR: 8825
b) gain in let period: 27750 x 193/283 = 18925
c) max allowed: 40,000
lowest = LR =a = £8825


net taxable gain: 27750 – 8825(PRR) – 8825 (LR) = £10100
Annual exemption £11100
No CGT payable