CGT calculation

Nomunnofun1

Bookworm105 said:

Cobbler_tone said:

uknick said:

Cobbler_tone said:

Ref one of the comments above. I put a new kitchen and bathroom through on mine and it was audited and flowed through without any issues. They were a lot more than your numbers!

One thing of note, you can only add a maximum of two attachments, so best to compile your receipts on a spreadsheet.

When asked, how did you justify the spend as being of a capital nature?  For example, if your original bathroom had an old tin bath with no running water connected and you then installed a modern bathroom that is an improvement and should be counted as capital.  But, if you just stripped out an old modern style bathroom and replaced it with like that shouldn't really be considered capital in nature.

I didn’t go into that detail. I put a new bathroom and new kitchen in and attached all the evidence associated to them.
I didn’t put in anything for decorating between tenants, new carpets etc.
Like I said, they accepted it.

giving advice based on "this is what I got away with" may have a place on an advice forum, but does not make it the "right" answer

you might have saved more tax had you claimed against rental income as a repair ?

Absolutely correct! I would suggest that Cobbler Tone was a tad fortunate. 

Nomunnofun1

phil_the said:

Thanks for the replies. 
It looks like I have miscalculated the proportion of time as main residence. You've come up with a slightly higher % for PRR. so I'll look at that again and check the difference between your calculation and mine. 
Thanks for the link regarding improvements vs repairs. It does specifically mention upgrading from single to double-glazing which is what we did. Unhelpfully it states that at one time this would have been considered an improvement but is now considered a repair, but does not give a date.
My profits from self-employment and rental income varies from year to year but it is often quite close to the personal allowance so some years I pay income tax and sometimes don't.
Am I right that it goes on this year's income? If so, how can I know what that will be before the end of the financial year? The online calculator asks you for an 'expected' value. I thought this was just to work out if you are a high rate tax payer or not. I tried putting a couple of different values in, and it made no difference to the final figure which seemed to confirm that. I'll try this again.

What you DID do was to REDUCE the total period of ownership by the additional nine months when it should have been ADDED to the period where it was your main residence. 

Correcting this was to your benefit ironically.

eskbanker

Cobbler_tone said:

Ref one of the comments above. I put a new kitchen and bathroom through on mine and it was audited and flowed through without any issues. 

To what extent was it actively audited, versus simply not being challenged?

Cobbler_tone

eskbanker said:

Cobbler_tone said:

Ref one of the comments above. I put a new kitchen and bathroom through on mine and it was audited and flowed through without any issues. 

To what extent was it actively audited, versus simply not being challenged?

No idea and when I submitted it I did so after reading the notes on the HRMC system, which TBH could be a lot clearer. From memory it talked about not claiming for cosmetic work. I can remember it wasn’t too helpful making you calculate the net gain, as opposed to what could be a calculation based on your own tenancy vs period rented out.

I certainly didn’t submit it thinking I was ‘getting away’ with anything and would hazard a guess that I put far more detail in than most.
Anyway, one tenant wrecked my kitchen to the extent that it cost me £6k for a new one, so I see no issues with my claim and most importantly neither did HMRC.

Nomunnofun1

Cobbler_tone said:

eskbanker said:

Cobbler_tone said:

Ref one of the comments above. I put a new kitchen and bathroom through on mine and it was audited and flowed through without any issues. 

To what extent was it actively audited, versus simply not being challenged?

No idea and when I submitted it I did so after reading the notes on the HRMC system, which TBH could be a lot clearer. From memory it talked about not claiming for cosmetic work. I can remember it wasn’t too helpful making you calculate the net gain, as opposed to what could be a calculation based on your own tenancy vs period rented out.

I certainly didn’t submit it thinking I was ‘getting away’ with anything and would hazard a guess that I put far more detail in than most.
Anyway, one tenant wrecked my kitchen to the extent that it cost me £6k for a new one, so I see no issues with my claim and most importantly neither did HMRC.

That kitchen expense is definitely a repair and could only have been claimed against rental income. 

Bookworm105

Cobbler_tone said:

eskbanker said:

Cobbler_tone said:

Ref one of the comments above. I put a new kitchen and bathroom through on mine and it was audited and flowed through without any issues. 

To what extent was it actively audited, versus simply not being challenged?

Anyway, one tenant wrecked my kitchen to the extent that it cost me £6k for a new one, so I see no issues with my claim and most importantly neither did HMRC.

as i said HMRC do not have the resources to police things in the way people think they do 
You obviously had limited understanding of what you were doing, as shown by your treatment of repairs arising from the tenancy. QED you "got away with" because you came from ignorance and were not picked up on it.  

Cobbler_tone

I think some of the desktop experts are getting their wires crossed. There are clear differences between commercial and domestic properties. I upgraded the old (wrecked) kitchen (and bathroom) with much better standards and features, it was a capital improvement, especially as I did a significant amount of work (including a wrecked bathroom) to the property originally. 
I understood the rules just fine but you can argue that I didn't and the HMRC failed to pull me up on several occasions. I know what relief repairs have (against rental income during SA) and capital improvements.

I've sold enough properties to understand how the system works. Maybe the HRMC are REALLY bad?!

Nomunnofun1

Cobbler_tone said:

I think some of the desktop experts are getting their wires crossed. There are clear differences between commercial and domestic properties. I upgraded the old (wrecked) kitchen (and bathroom) with much better standards and features, it was a capital improvement, especially as I did a significant amount of work (including a wrecked bathroom) to the property originally. 
I understood the rules just fine but you can argue that I didn't and the HMRC failed to pull me up on several occasions. I know what relief repairs have (against rental income during SA) and capital improvements.

I've sold enough properties to understand how the system works. Maybe the HRMC are REALLY bad?!

You have just described  the very definition of a revenue, not capital, expense in the kitchen. 

Not sure about ‘desktop expert’ but I am ex HMRC if that helps - used to be on here many years ago under a different username. 

HMRC adopt a ‘process now, check later’ approach. Hopefully you will not be checked at a later date. 

Bookworm105

Cobbler_tone said:

I think some of the desktop experts are getting their wires crossed. There are clear differences between commercial and domestic properties. I upgraded the old (wrecked) kitchen (and bathroom) with much better standards and features, it was a capital improvement, especially as I did a significant amount of work (including a wrecked bathroom) to the property originally. 
I understood the rules just fine but you can argue that I didn't and the HMRC failed to pull me up on several occasions. I know what relief repairs have (against rental income during SA) and capital improvements.

I've sold enough properties to understand how the system works. Maybe the HRMC are REALLY bad?!

well if you reject "desktop experts" who provide reference to the manuals to support their statements perhaps you would provide authoritative evidence that there is a distinction between "commercial" and "domestic" in respect of capital expenditure for property CGT purposes?

I await your evidence... perhaps you could also put us in touch with your accountant as they seem happy to chance their professional negligence insurance 

CG15150P - Capital Gains manual: introduction and computation: computation: expenditure: contents - HMRC internal manual - GOV.UK

CG15160 - Expenditure: categories of allowable expenditure - HMRC internal manual - GOV.UK

CG15180 - Expenditure: enhancement expenditure - HMRC internal manual - GOV.UK

phil_the

Interesting debate on improvement vs repair, I've been having the same discussion with my wife. I think the point is moot anyway for me, as it was probably already claimed against income tax way back when.
My figures probably seem small because things were a bit cheaper 18 years ago.