Capital Gains Tax, Main Residence Query

2

Comments

  • masonj3
    masonj3 Posts: 202 Forumite
    Thank you again & for explaining about property B's CGT, I think she intends to keep it until death but it is helpful to know the facts x

    Is there an official website I should use to ascertain the historical value of the properties - thank you
  • masonj3 wrote: »
    Is there an official website I should use to ascertain the historical value of the properties - thank you

    You actually don't need such a service.

    The gain on any of the properties would, instead, be apportioned with the total period where it was the PPR divided by the WHOLE period of ownership (there are other reliefs). So, you have already the actual costs of each property as a matter of fact.
  • masonj3
    masonj3 Posts: 202 Forumite
    I’m really sorry but I don’t understand.

    Eg property A purchased in 1980 possible that cgt is owed from 2004 to 2012 when sold. How would I work that out for that period ?

    Also property C, owned jointly for 4 years and then inherited 50% of property upon husbands death - meaning if sold today she would receive 100% of profit as now only owned by her ( less obvious costs).

    Sorry to be a nuisance I just really can’t get my head around it.
  • [Deleted User]
    [Deleted User] Posts: 0
    First Anniversary Photogenic Name Dropper First Post
    Newbie
    edited 31 August 2018 at 9:00AM
    00ec25 is much better at this sort of thing than I am but ....

    Property bought in 1980 and sold in 2012 - this is 32 years. Calculations are normally done in months - 384 months.

    Property is main residence until 2004 (I presume that you are still not accepting the high likelihood that the house was a main residence throughout) - this is 288 months.

    You work out the gain on the house. The private residence proportion will be 288/384 - this reduces the chargeable gain by this fraction. A further relief is due for the last 18 months - a further 18/384 proportion comes off.

    Now - to further complicate matters. Capital Gains rules changed on 31st March 1982. You have the option to choose the original cost in 1980 or the value at March 1982. You will have to engage the services of an independent valuer to determine (guess) the value at 31st March 1982. HMRC will do their own guessing also.

    Property C is simpler. Let's say it was purchased jointly for £195000 plus legal costs of £5000 = £200000 in September 2012.
    Probate value at the time of your Dad's death was £230000 in September 2016.
    It is now going to be sold in September 2018 for £255000 less selling costs of £5000 = £250000.

    First half:

    Proceeds £125000 less cost £100000 (half of purchase cost in 2012) - gain is £25000.

    Second half:

    Proceeds £125000 less £115000 (half of probate value in 2016) - gain is £10000.

    Total gain - £25000 plus £10000 = £35000.

    Is that helpful?
  • xylophone
    xylophone Posts: 44,140
    Name Dropper First Anniversary First Post
    Forumite
    Why are you unwilling to accept that property A was your parents' PPR up to 2012?
  • xylophone wrote: »
    Why are you unwilling to accept that property A was your parents' PPR up to 2012?

    Indeed. As I said earlier I would find it very difficult to justify any decision that it was not.
  • masonj3
    masonj3 Posts: 202 Forumite
    Hi

    Thank you again for your replies.
    The whole thing has really confused me, i do now understand that property A was their main residence until 2012, I was just confused when writing my post. Apologies for this.

    Property B will be where cgt comes into effect if my mom sells the property with her liability between 2002-2012.

    Property C - I totally understand your calculations now,

    Thank you all so much for your time and help, this just wasn’t sinking in for me at all, really appreciated xx
  • jimmo
    jimmo Posts: 2,281
    Name Dropper First Post First Anniversary
    Forumite
    There is nothing I would argue with in everyone's interpretation on main residence.
    However I do think purdyoaten's method of calculation is wrong and could significantly influence the final tax bill. Without figures its not possible to say much more
    For what its worth, my view is that the first thing to do is identify the chargeable asset that has been disposed of. In this case it is property B. The whole thing will be sold by one chargeable person, not 2 half-shares.
    Then establish the cost of the chargeable asset.
    For "mom" therefore she originally purchased a half share interest in the property in 2002. Then, in 2016, she enhanced that half share interest into the entirety at deemed cost.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg15230

    With regard to the deemed cost it is important to remember that it is a question of the open market value of "dad's" half share interest at the date of his death. He did not leave a half share of a property with vacant possession. He left a half share interest in a property with the other half share owner, "mom", living in it. The open market value of that could well be relatively small.
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg31140

    And finally, where I fear this may seriously bite is PRR. In using pudyoaten's method there would be a serious temptation to think that the gain on the half share interest acquired by inheritance is completely covered by PRR because both acquisition and disposal took place during the period of occupation.
    The correct method is to establish the overall gain over the whole period of ownership and then apply PRR to that
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg64977
  • 00ec25
    00ec25 Posts: 9,123
    Combo Breaker First Post
    Forumite
    edited 22 January at 2:51PM
    [quote=[Deleted User];74729768]Now - to further complicate matters. Capital Gains rules changed on 31st March 1982. You have the option to choose the original cost in 1980 or the value at March 1982. You will have to engage the services of an independent valuer to determine (guess) the value at 31st March 1982. HMRC will do their own guessing also.[/QUOTE]not really relevant to the context of property A since we all consider it exempt, but after CGT "Simplification" was introduced on 6/4/2008, individuals must use the 1982 value.
    Only companies still have a "choice".
    https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg16760
  • xylophone
    xylophone Posts: 44,140
    Name Dropper First Anniversary First Post
    Forumite
    For what its worth, my view is that the first thing to do is identify the chargeable asset that has been disposed of. In this case it is property B. The whole thing will be sold by one chargeable person, not 2 half-shares.

    There is no indication that property B (purchased by mother in her sole name in 2002 and PPR for her and her late spouse from 2012) is to be sold?


    As I understand it, the current proposal is to sell property C, purchased by the couple after the sale of their PPR property A in 2012
    My mom now wants to sell that property (purchased in 2012) and purchase another one

    which has never been a residence for either the OP's mother or his late father.

    The OP does not mention that his mother wishes to sell property B where she currently resides but rather to sell C and buy another property with the proceeds.

    He does not say what mother would intend to do with the new purchase.
This discussion has been closed.
Meet your Ambassadors

Categories

  • All Categories
  • 342.5K Banking & Borrowing
  • 249.9K Reduce Debt & Boost Income
  • 449.4K Spending & Discounts
  • 234.6K Work, Benefits & Business
  • 607.1K Mortgages, Homes & Bills
  • 172.8K Life & Family
  • 247.4K Travel & Transport
  • 1.5M Hobbies & Leisure
  • 15.8K Discuss & Feedback
  • 15.1K Coronavirus Support Boards