Capital Gains Tax

Info_Hunter1976

Sorry if this has been asked before-

We took over a pub in 2017 and in covid we moved above it.
We never returned to our home and in that time it fell in to disrepair.
We have been paying double council tax for an empty home since then.

We are in the process of doing it up and selling it.
Hoping to get £220-250k for it and qe bought it in 1999 for £96k.
We still have a mortgage of about £60k after a remortgage about 20 years ago. Previous mortgage was interest only type one.
This one runs out in about 10 years.

When it says about making a profit does it take in to account the amount we have paid in interest and overall amount paid for the house?!

Anything I can do to reduce what looks like about a £35k bill when we sell?

Thanks for your help in advance.

eskbanker

Info_Hunter1976 said:

When it says about making a profit does it take in to account the amount we have paid in interest and overall amount paid for the house?!

CGT calculations are based on sale price minus purchase price, less transaction costs, less any eligible improvement costs, but not interest.

https://www.gov.uk/tax-sell-property/work-out-your-gain

However, you'll receive Private Residence Relief for the time when it was your home, so that should reduce your CGT liability significantly:

https://www.gov.uk/tax-sell-home

Nomunnofun1

Mortgages are irrelevant as is the interest paid thereon. 

You propose to sell it for, say, £250000.
You bought it for £96000.
The gain before reliefs is £154000. Costs associated with purchase and sale can also be deducted in addition to capital improvements. 

The period of ownership is, let’s say, 312 months. 

You lived in it until 2020? Let’s say 252 months and you can add another 9 as it was your main residence at some point. 

261/312 of the gain is covered by private residence relief- £128826 leaving a chargeable gain before annual exemption of £25174.

There is no chance that the capital gains bill will be anywhere near £35000 - perhaps £5000 max but I have used a lot of estimated figures. 

I would seek professional advice, given your questions and given that you must EACH declare the gain AND pay any tax due within 60 days. You need to provide more exact dates. 

Bookworm105

seek professional advice
the fact that you lived in accommodation that was part of the business premises, you owned the business, and "had" to be on site to run it, may (I say may) mean you can claim work related accommodation exemption from CGT for the empty period of the ("ex") main home meaning no CGT on it at all

seek professional advice....

Jeremy535897

Bookworm105 said:

seek professional advice
the fact that you lived in accommodation that was part of the business premises, you owned the business, and "had" to be on site to run it, may (I say may) mean you can claim work related accommodation exemption from CGT for the empty period of the ("ex") main home meaning no CGT on it at all

seek professional advice....

That's a very interesting observation. The rules are quite limited though, and only apply to to employees, or self employed people where the job-related accommodation must be provided by another person under the terms of a contract that requires you to live in the property and carry on a particular trade. That may be the case here. It does look like this is a case to seek professional advice.

Grumpy_chap

Info_Hunter1976 said:

We took over a pub in 2017 and in covid we moved above it.
We never returned to our home and in that time it fell in to disrepair.
We have been paying double council tax for an empty home since then.

We are in the process of doing it up and selling it.

eskbanker said:

CGT calculations are based on sale price minus purchase price, less transaction costs, less any eligible improvement costs, but not interest.

Nomunnofun1 said:

Costs associated with purchase and sale can also be deducted in addition to capital improvements. 

There are some quite tight definitions around capital improvements that are eligible to be discounted from the CGT calculation.
An extension, for example, would usually count as capital improvement.
Any maintenance rarely does, even if it is a big-ticket item such as a new roof or new windows.
If the property now needs a large amount of expenditure to make good disrepair while the property was vacant and not maintained, that expense would appear, to me at least, to be maintenance expenditure - the fact it has landed all at once rather than distributed across the past 10 years would be immaterial so far as I can make out.

Others have commented on ensuring that you take advantage of the PPR for the period while you lived in the house plus the possible relief for job-related accommodation.

You may also consider the extent to which spending on the maintenance to sell and achieve a higher value is worthwhile.  Firstly, you have the time and effort required.  Secondly, you may decorate and make it lovely but the new Buyer might simply not like the taste and change everything.  Thirdly, you are increasing the value but if that increase is then subject to CGT you have only yielded a portion of the return which (after allowing for the costs) might be zero or close to.

Finally, you say you "took over" a pub.  Was that an owned pub, or a lease?
It might make a difference as there was another thread recently where it was suggested that living in a rented property still allowed another owned property to be designated at PPR for CGT purposes.  Whether a leased pub would have the same rules I am not sure.  I am not really informed on the rules for this approach, but Jeremy is. 
It may be moot if the pub is owned.
Also moot if the other allowances available (PPR / job-related) mean the CGT is nil in any case.
Here is the other thread for reference:
https://forums.moneysavingexpert.com/discussion/6586989/cgt-query-on-second-home-prr-while-also-renting-fairly-complicated/p1

Nomunnofun1

Grumpy_chap said:

Info_Hunter1976 said:

We took over a pub in 2017 and in covid we moved above it.
We never returned to our home and in that time it fell in to disrepair.
We have been paying double council tax for an empty home since then.

We are in the process of doing it up and selling it.

eskbanker said:

CGT calculations are based on sale price minus purchase price, less transaction costs, less any eligible improvement costs, but not interest.

Nomunnofun1 said:

Costs associated with purchase and sale can also be deducted in addition to capital improvements. 

There are some quite tight definitions around capital improvements that are eligible to be discounted from the CGT calculation.
An extension, for example, would usually count as capital improvement.
Any maintenance rarely does, even if it is a big-ticket item such as a new roof or new windows.
If the property now needs a large amount of expenditure to make good disrepair while the property was vacant and not maintained, that expense would appear, to me at least, to be maintenance expenditure - the fact it has landed all at once rather than distributed across the past 10 years would be immaterial so far as I can make out.

Others have commented on ensuring that you take advantage of the PPR for the period while you lived in the house plus the possible relief for job-related accommodation.

You may also consider the extent to which spending on the maintenance to sell and achieve a higher value is worthwhile.  Firstly, you have the time and effort required.  Secondly, you may decorate and make it lovely but the new Buyer might simply not like the taste and change everything.  Thirdly, you are increasing the value but if that increase is then subject to CGT you have only yielded a portion of the return which (after allowing for the costs) might be zero or close to.

Finally, you say you "took over" a pub.  Was that an owned pub, or a lease?
It might make a difference as there was another thread recently where it was suggested that living in a rented property still allowed another owned property to be designated at PPR for CGT purposes.  Whether a leased pub would have the same rules I am not sure.  I am not really informed on the rules for this approach, but Jeremy is. 
It may be moot if the pub is owned.
Also moot if the other allowances available (PPR / job-related) mean the CGT is nil in any case.
Here is the other thread for reference:
https://forums.moneysavingexpert.com/discussion/6586989/cgt-query-on-second-home-prr-while-also-renting-fairly-complicated/p1

My original post was a simple (very) calculation on what was presented. The op gives no exact dates. It could have been bought in January 1999 or December 1999. They could have moved out in March 2020 or October 2021- both represent quite a difference in the PRR! No account was provided of legal costs or, as you say, improvements costs. It could well be that nothing else needs to be considered as there is no liability, or there could be!

Either way, the very fact that the op anticipated a bill of bill of £35000 suggests that advice is required.