CGT on sale of rental property. Expenses allowable?

Rural_Puppy

About to sell a rental property that I have never lived in, and suspect there will be a taxable gain for CGT. Trying to work out what I can legitimately claim for allowances on expenses.

My understanding is that the taxable gain is the difference between the purchase price and sale price less:
Legal expenses when buying
Sale costs and legal expenses relating to the sale
Annual allowance of £11,700
Some types of improvements.
Q Does this include refurbishment (new kitchen, bathroom, redecoration, new carpets etc)
Q Can I deduct the amount of the buy to let mortgage fee I paid when I remortgaged several years ago?

Can you let me know if I am missing anything?
eg Is it worth moving in for a short period of time to try and claim PPR, or will HMRC view this as being purely for the purposes of avoiding CGT liability?
Thank you.

Pennywise

Rural_Puppy wrote: »

Some types of improvements.
Q Does this include refurbishment (new kitchen, bathroom, redecoration, new carpets etc)
Q Can I deduct the amount of the buy to let mortgage fee I paid when I remortgaged several years ago?

Did you claim any of these costs against rental income at the time? You can't claim twice.

Assuming you didn't, you can't claim against capital gains if there is no "enhancement". If, say, the new kitchen was basically "like for like" i.e. replacing units, worktops, etc., then, no, that's just normal wear and tear repair. Redecoration certainly not. New carpets, again no. It's only new things, such as installation of central heating when there wasn't any there before, or an extension or loft conversion, or knocking two rooms into one, etc.

00ec25

you can claim SDLT paid on original purchase - if there was any?


as above you can't claim for what should have been treated as revenue costs not capital costs


as for moving in, as you'd expect with such an obvious ploy therre are many legal cases examinimg whether occupation meets the baseline test: sufficient degree of permanence, continuity or expectation of continuity to justify its description as residence

since you already intend to sell, the continuity aspect would be highly suspect even if you genuinely meet some of the aspects that define "occupation" such as :
- where you live in relation to where you work (sensible commute?)
- where your kids go to school
- where you friends and social live revolve around


I'd suggest you forget about claiming PRR - HMRC won one case where the guy lived there for >1 year but they showed it was a "temporary" arrangement

Rural_Puppy

Thanks all. Agree thought it would be rather naive to think HMRC would accept it as my home just before I put it on the market!
-I replaced old single glazed timber windows with uPVC double glazing. Is this seen as maintenance, or improvement?
I did not claim the cost of the remortgage fee (around £2,500) as an expense at the time, as I thought I could only claim the mortgage interest against the rental income. Is that correct?

mikebr54

I have a personal small holiday home that is not rented. We bought it when it was derelict, pulled it down and had a new log cabin built. We then fitted it out with kitchen, bathroom and all F&Fs to make it habitable. If we sell it what will we be able to claim as modernisation expenses against the profit? EG: we bought it for £65000 plus legal expenses, spent money on replacing and fitting it out. If we sell it for £140000 what would our CGT liability be taking into account any expense we could claim? I am a standard rate tax payer. Thanks

00ec25

mikebr54 wrote: »

pulled it down and had a new log cabin built.

so the original asset no longer exists and therefore your original cost needs to be split between :
- the value of the land it sat on
- the value of the derelict property on it

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15190

the cost of the demolition
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15770

https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15773

mikebr54 wrote: »

had a new log cabin built. We then fitted it out with kitchen, bathroom and all F&Fs to make it habitable.

so you replaced the derelict structure with a new build. Therefore the entire build costs are allowable. That assumes of course you have retained documentary evidence of such build costs in case HMRC challenge you