Capital Gains Tax offset

malcolmellis14

In 1997 we purchased a property with 1.2 acres of land.
In 2011 we split off 0.45 acres to build a bungalow which we used as a holiday rental
We sold our main property in 2015, but kept the bungalow and continued to use it as a holiday rental.
In 2018 we sold the bungalow, my question is; if we had not split off the 0.45 acres we would have been able to sell our main property for considerably more than we did within its subsequent 0.75 acres, so can we offset the estimated loss of value of our main property against the capital gains tax on the bungalow? And will the Inland Revenue accept our estimate? There were also two existing buildings on the land, can an estimate for these also be set against CGT?

Pennywise

Your base cost for CGT of the let bungalow will be the value of the land when it stopped being part of your main home, plus the costs of building the bungalow and all associated professional fees (legal, architects, planning etc).

It's nothing to do with the reduction in value of your main residence.

00ec25

no you cannot

jimmo

Pennywise wrote: »

Your base cost for CGT of the let bungalow will be the value of the land when it stopped being part of your main home.

I don't think that's right. It certainly would be if the land had been taken into trading stock by a builder or property developer but that is not what happened.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg69200

When the main property was sold in 2015 that was a part disposal from the original asset and whilst the capital gain on the part disposed was covered by PRR it nevertheless needs to be calculated now to establish the original acquisition value of the part retained.

When the part retained was sold in 2018 there will be no PRR.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64377