Help working out CGT

TallGirl

Hope you don't mind but I'm stuck working this out. I've used the .gov calculator but I get stuck with the residential relief and letting relief.

Bought jointly with ex Sep 1994 £85.500
No idea of buying costs it was a new build and we did use solicitors
Improvements extension £30000
Bathroom/wet room £15000
Sold 05.09.19 £360000
Estate agent fees and solicitor cost £5500

Lived in together Sep 94 to April 16
Husband lived there until Aug 17 when he died and I inherited the whole property no will
Property rented out Oct 17 to Apr 19 then empty until sold. I paid tax on rent as per usual.

I feel stupid I cannot do it I've done my tex returns no problem the last 3 years due to rental income so I assume this will be a calculation on the online return for this tax year 19/20 so will need to be paid after April 20?

Many thanks for your help

00ec25

the wetroom is unlikely to be accepted as a capital improvement unless there was a HUGE change in the size of if. You started with a bathroom, you finished with a bathroom. There was no capital "addition"

the underlying principle is: part or entirety
the usual example is a "new" roof. The building had a roof, now it has a new one. The roof is part of the building. The roof is not an asset on its own, it does float in mid air, it is a part of the whole, so a new one is not an improvement, it is merely a repair,, so not a capital cost.

can we be clear on what you mean by "husband lived there"
do you mean in reality you and he lived together as a married couple until his death, or had you separated pre death?

a married couple can only have one exempt main residence unless they divorce or are living apart in circumstances where the separation is likely to be permanent (ie they've split as a couple!)

as for the mechanics of the calculation see here:
https://forums.moneysavingexpert.com/showpost.php?p=73621764&postcount=2

post your answer if you want someone to check it

Keep_pedalling

Was the property held as tenants in common and you inherited because your were still married, or were you divorced with the property held as joint tenants?

TallGirl

Sorry need to clarify. Agree re wet room no improvement it was an en-suite before.

We separated the final year he lived there on his own no divorce and I rented a room elsewhere. I inherited property as we were joint owners and no divorce joint tenants not tenants in common.

Thanks

TallGirl

Bought jointly with ex husband Sep 1994 £85.500 joint tenants
No idea of buying costs it was a new build and we did use solicitors
Improvements extension £30000
Sold 05.09.19 £360000
Estate agent fees and solicitor cost £5500

Lived in together from Sep 94 to April 16
Husband lived on his own I was renting separately as we had split up until Aug 17 which is when he died and I inherited the whole property no will
Property rented out Oct 17 to Apr 19 then empty until sold. I paid tax on rent as per usual.

I thank you both for your comments and the link to the calculation but if anyone could have a look I would be very grateful. Trying to work out my budget for renovations at the place I am now buying.

Thanks

jimmo

First of all I disagree with 00ec25 about the wet room.
See this link for the test for enhancement expenditure.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15183
Particularly in the case of property there is a subjective test e.g. one buyer could open up say a lounge and dining room to make one larger room. He/she would consider that an improvement whereas a subsequent buyer may choose to divide the larger room into two smaller ones and that person would believe that to be an improvement.
Similarly the wet room enhanced the property for you but your buyer may choose to reinstate the en-suite.
The wet room was an improvement as far as you are concerned. The en-suite will be an improvement as far as your buyer is concerned.
Also I presume the wet room and extension were done whilst your husband was still alive.

So, Sale proceeds £360,000
Deduct:
Cost of sale £5,500
Half share of purchase £42,750
Half share of enhancements £ 22,500
Value of husband's half share at the date of his death: £To be determined.
Overall gain £: To be determined.

Hopefully once you can get there you will be able to follow 00ec25's excellent worked example on PRR and lettings relief.
To get there you need a value of your husband's half share. Please bear in mind that HMRC will definitely review the value you use. If they are happy they won't contact you and your self-assessment will stand. If they are unhappy there will be an enquiry/compliance check.
Also the open market value of a half share interest in a property will not be 50% of the market value of the entirety. When I was still working that was typically discounted by between 10 and 20% but I was not aware of the factors taken into account by the Valuation Office Agency in arriving at individual discounts.

You could also request a Post Transaction Valuation check.
https://www.gov.uk/government/publications/sav-post-transaction-valuation-checks-for-capital-gains-cg34

I would suggest you make your own estimate for now, make the calculations to judge where you stand and take it from there.

00ec25

jimmo wrote: »

First of all I disagree with 00ec25 about the wet room.

do you only reply to posts where you can disagree with people?
I stand by my statement, as covered in PIM 2030
I note you have PM turned off and have chosen to ignore the other 2 CGT threads, incl the one with no answers at all.

xylophone

ex husband

"Late" or "late estranged" not "ex" as you were never divorced.

TallGirl

Thanks guys I'm even more confused now honestly not sure how to work it out I think it will have to be an accountant that helps me in the end.

As for the above the value at time time of my husbands death (yes not ex) which was 4 years ago I estimate the property to be valued at £350000 prices haven't gone up massively in our area due to Brexit most sell for under the asking price.

So, Sale proceeds £360,000
Deduct:
Cost of sale £5,500
Half share of purchase £42,750
Half share of enhancements £ 22,500
Value of husband's half share at the date of his death: £To be determined. I think £350000
Overall gain £: To be determined. Would that be my share only or calculate both that's where I'm unstuck already if mine then I'm guessing
My share at husbands death £175000
Increase since husbands share £10000

Ok tried using the excellent guide for my half only

Sale price £36000p
Cost of sale £5,500
Half share of purchase £42,750
Half share of enhancements £ 22,500 = £289250

Then I had a go at the private letting relief
Owned Sep 94 to Sep 19 = 25 years
Lived in by me Sep 94 to Apr 15 = 20.7 years add 18 month = 22.3 years

PRR calculation for me should look like this sale cost minus expenses as above £289250 x 22.3 / 25 = £258011

Have I got it right so far or am I way off?

Husband lived in house up to Aug 16 so instead of 22.3 years out of 25 it would be 23.7 out of 22 years owned as he was dead the last 3 I owned it.

Thanks for any responses will pay for professional advice just wanted some idea. I'm a low rate tax payer by the way so that's 18% and I've not used any of my CGT allowance £12000

jimmo

We are considering here a single asset, the house.
You originally bought a half share in 1994 and obtained the other half when your husband died in 2017.
The deemed cost of the second half share is the market value at the date of his death and is regarded as enhancement expenditure.
The first step then is to determine the amount of the gain on the whole asset.

Sale proceeds £360,000
Deduct:
Cost of sale £5,500
Half share of purchase £42,750
Half share of enhancements £ 22,500
Value of husband's half share at the date of his death: £175,000
Overall gain £114,250
Only when you have determined the amount of the gain on the whole asset can you move onto calculating Private Residence Relief.

When considering the relief you have to take into account the whole period of ownership and then consider what part or parts of the whole period of ownership qualifies for relief.
https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64930

Total Period of ownership 9/94 to 9/19 = 300 months
Occupied by you 9/94 to 4/16 = 0.25 259 months
Final 18 months 3/18 to 9/19 = 0.4737 18 months
Total residence 277 months
Period of letting not already covered 1017 to 3/18 = 0.1667 5 months.

Total Gain £114,250
PRR (277/300) £1105,490
Letting Relief (5/300) £1904
Chargeable gain £6856
Assuming you have no other Capital Gains this year you have an annual exempt amount of £12,000 meaning there is no tax to pay.

Please bear in mind that this is very rough and ready and in particular the value of a half share interest in a property is usually not equal to half the value of the entirety. I would think a discount of 10 to 20% is likely.
We have a difference of opinion on here about the wet room. If you want to be cautious you might prefer to leave that out.
Anyway I hope I have given you sufficient to enable you to play around with the figures.

TallGirl

Thank you so much for your help really reassuring and I will get someone to help complete my next tax return. Thank again