Capital gains tax

michno8

I purchased a repossession property in 2009. As a btl. I have done a lot of improvements over the years to upgrade . In the house and garden . Can I offset these for the working out of CGT without receipts . I do have before and after photographs . Any advice welcome . Thank you 

Mutton_Geoff

Have you kept an accurate record of your expenditure? Bear in mind your CGT form is part of the "self assessment" so you can put whatever figures you like in the boxes. If you then have an HMRC investigation you'll have to justify those numbers somehow.

michno8

Unfortunately I haven't so it would be a ball park figure calculating under what I spent rather than over though . I replaced the combi boiler with a condensing boiler , replaced a few windows to match the rest . Put a quality kitchen in to replace a basic one and replaced a perfectly useable but old bathroom suite with a new modern one . Completely renovated garden and put in new fencing and gates . Replaced the wooden doors to upvc ones . Would they accept a ball park figure or are they more thorough and not accept before and after photos . 

Keep_pedalling

Much of that sounds does not sound claimable, surely you already offset these expenses against the rental income? You can’t use them to reduce IT and then double up by using them again to reduce CGT.

Mutton_Geoff

As I mentioned, your tax return is a self assessment. Nobody checks anything other than a computerised calculation of tax owed. It is only if you are selected for further investigation that you will have to justify your figures.

Acceptance of your tax return and the issue of a tax demand does not mean they agree with you. An investigation can be triggered anytime in the future (6 years?) so it will be some time before you can rest easy.

What sort of thing were you claiming for to offset tax on your rental income? Don't forget anything that involves betterment can't be claimed against rent but can be used against CGT.

Unfortunately ignorance of tax matters is no defence in the eyes of HMRC. Time to dig through historic bank and credit card statements & that shoebox full of receipts.

michno8

I haven't offset anything at all against my rent over the years as the rent I  collected was under the bracket where it made any difference to any tax 

Mutton_Geoff

michno8 said:

I haven't offset anything at all against my rent over the years as the rent I  collected was under the bracket where it made any difference to any tax 

Your rental income was less than £83 a month?

Above that you still need to declare the income to HMRC even though you judge it to be below any tax threshold. By doing this you would have been able to carry forward any losses/costs to mitigate future tax bills although there is no crossover/allowance between rental income losses and CGT gains on the same property.

You must contact HMRC if your income if between £1,000 and £2,500 a year and you must complete a self assessment if your rental income is more than £2,500. Unless your rental income was £83 a month or less, you are putting yourself at serious risk.

https://www.gov.uk/renting-out-a-property/paying-tax

km1500

simply add together all the money you have spent on the property and deduct it from your gain.

If you don't have receipts and it's challenged then itemise everything for them when asked - they will make a judgement and let you know if anything is not allowable. Chances are they won't even ask.

don't forget cgt has to be paid soon after the sale ie don't wait until your next tax return

badger09

km1500 said:

simply add together all the money you have spent on the property and deduct it from your gain.

If you don't have receipts and it's challenged then itemise everything for them when asked - they will make a judgement and let you know if anything is not allowable. Chances are they won't even ask.

don't forget cgt has to be paid soon after the sale ie don't wait until your next tax return

Doesn’t sound as though OP has been submitting tax returns for their BTL income. 

@michno8
Although your question was about CGT on the forthcoming sale of your BTL property, you really need to get some figures together for your rental income & expenditure for each tax year since you bought it in 2009. It might be the case that no tax is due, but that doesn’t mean you didn’t need to submit annual tax returns. 

Please consider making a voluntary disclosure asap, rather than wait for HMRC to ask questions when you notify your CGT liability. If any tax is due, penalties can be mitigated for disclosure, though I think late filing penalties will still be due. 

Perhaps @Dazed_and_C0nfused
can confirm. 

Mutton_Geoff

badger09 said:

Doesn’t sound as though OP has been submitting tax returns for their BTL income. 

That's what I thought too. It's unfortunate the lettings market is full of amateur landlords. This post shows the other side of the coin and I wish the OP on that thread the best of luck!

https://forums.moneysavingexpert.com/discussion/6400865/renting-help-please/p1

LegallyLandlord

I’d go through your bank account and credit card and at least have some form of evidence. 

For CGT as an individual, you claim the cost of purchase and sale, and any improvements, as well as your annual allowance. Here’s guidance on improvements: https://theindependentlandlord.com/resources/property-investors-glossary/improvements/

Do note you need to report on any capital gain on a property sale that isn’t within your annual exemption within 60 days (new rules). For more, see: 

https://theindependentlandlord.com/resources/property-investors-glossary/improvements/

In terms of allowable expenses against income, this is what you can claim as an individual: 

https://theindependentlandlord.com/resources/property-investors-glossary/improvements/

Hope that helps! But do get an accountant to help bid you are a member of the NRLA, they recommend some advisers. If you’re not a member, you should be! They have a great helpline and lots of resources.