Capital Gains Tax Query

foureyes · 15-08-2008, 12:23

Calling all tax experts...

Hello.

Hopefully this is a relatively simple problem:

SWMBO bought her flat in Dec 2003 and it was her only home. She moved out in Sept 2006 when we bought a house together with a joint mortgage. The flat has been let since Feb 2007 paying into her seperate mortgage so she has some rental income to declare but will she owe any CGT on it if she sells it soon?

I've contacted several local accountants but no ones got back to me yet. Info on the t'interweb is sketchy and alot of it related to tax year 2007 - 2008. I even rang HMRC direct and they told me they give 3 years from moving before you have to pay any but for some reason I'm still sceptical!

I look forward to any info - especially if it confirms she doesn't have to pay any CGT!

Cheers.

nokiauk · 15-08-2008, 12:37

Not an expert but in a similar situation

As far as I know as its not her only property (she now owns one with you) she will be liable for tax on any of the gain in value from when she moves out will date of sale. I can't say how much the value will have gained by 18% is payable and expenses I'm sure can be deducted.

Something like this

Value in 2006 - £150k
Value now is - £190k

Gain is 40k

Say you selling costs come to £3k that leave you with 37k

You also have a personal allowance of I think £9,800 which would bring it down to £27,200

That would have a capital gains tax of £4,896 which isn't too bad.

There is some other costs involved but not sure but it involved purchase price etc as well.

Someone else may be better placed but thats roughly what my lawyer told me.

foureyes · 15-08-2008, 12:43

Thats what we've been basing our calculations on too. To be able to claim my CGT relief I'd have to get put on the deeds of the flat and its mortgage. Which I've spoke to the solicitors and building society about and it isn't a problem - just a solicitors fee of about £280.

I explained the joint house to HMRC when I rang up and she still pointed out the 3 years grace period on the original property. But she did also recommend I check a helpsheet on their website which was out of date...

nokiauk · 15-08-2008, 12:46

yes I'd forgot about that, makes sense as you 'll then have 2 x allowance, but may not save that much as if you name is added now then your half of the house will gain little or no value so not much tax to pay if any

foureyes · 15-08-2008, 12:55

Sorry, I read your sentence below as you reminding me about my CGT allowance on top of hers!

Quote:

Originally Posted by nokiauk

You also have a personal allowance of I think £9,800 which would bring it down to £27,200

The allowance for this tax year is actually £9600. So jointly we'd be able to deduct £19200 before working out the tax. I'm not sure if your point about 'my share' of the flat going up in value is correct or not but it was actually a guy at the building society who suggested getting my name on the deeds to claim my allowance too. I guess this is part of what I want clearing up.

daiking · 16-08-2008, 13:50

Quote:

Originally Posted by foureyes

I even rang HMRC direct and they told me they give 3 years from moving before you have to pay any but for some reason I'm still sceptical!

This is as I understand it for a simple case of own a home, live in it, move out, rent it for a bit then sell.

Why don't you believe them?

carly2237 · 17-08-2008, 07:46

No CGT - She will be 100% principle private residence relief. The 3 years grace relates to the last 3 years of ownership qualifying for PPR even if no occupancy. If you search Principle Private Residence on google or HMRC website it should give you all the details.

nokiauk · 17-08-2008, 08:54

Just wondering now if I will be liable for any after reading here.

I own my own property and have done for the last 3 years.

50% of my Grans property got transferred to my name last year (April/May), unfortunately she died earlier this year and the house is now up for sale and I am due to receive 50% of the sale price.

Will I be liable as I already own my home and this is effectively a 2nd property. Solicitor was of the opinion that as the house hasn't gained any value in the year I owned it then there would possibly be none if little tax for Capital Gains?

carly2237 · 17-08-2008, 09:19

You can only have one PPR at any one time therefore the disposal of your share of the 2nd property will be liable. However if this has made little or no gain on the market value you acquired your share at last year then this will likely be well below your annual exemption so no CGT to pay. Solicitor sounds right.

foureyes · 18-08-2008, 10:38

Quote:

Originally Posted by daiking

This is as I understand it for a simple case of own a home, live in it, move out, rent it for a bit then sell.

Why don't you believe them?

Because I know things change depending on the tax year and:

Quote:

Originally Posted by foureyes

...she did also recommend I check a helpsheet on their website which was out of date...

So I thought maybe she had out of date information. I'm a pessimist when it comes to money and the possiblity of getting into trouble!

Quote:

Originally Posted by carly2237

No CGT - She will be 100% principle private residence relief. The 3 years grace relates to the last 3 years of ownership qualifying for PPR even if no occupancy. If you search Principle Private Residence on google or HMRC website it should give you all the details.

Ok. cool. Thanks. But.. you go on to say:

Quote:

Originally Posted by carly2237

You can only have one PPR at any one time therefore the disposal of your share of the 2nd property will be liable.

This is where I get confused. My girlfriend has a share of our joint house. Does this not affect her PPR on her flat?

carly2237 · 19-08-2008, 12:11

Provided that your girlfriends house at some time was her only main residence (Dec 03 to Sep 06) the last 3 years of ownership are always exempt in calculating capital gains tax, whether she is living there or not.

The position for NokiaUK is different because his Grans house was never his only main residence at any time. The PPR rules have remained unchanged for some time so dont worry if the advice you find is not specific to 08/09.

Its a pretty complicated area and HMRC should be able to provide you with helpsheets and guidance through their website.

carly2237 · 19-08-2008, 12:16

Private residence relief: computation of relief: introduction

This is a good place to start on the HMRC website and then if you need further info simply search for the CGxxxxx numbers in the website search bar.

Good Luck

15-08-2008, 12:23	#1
foureyes Briskodian Join Date: Sep 2006 Posts: 297 Members Car: Fabia vRS, Black & STD Thanks: 16 Thanked 7 Times in 7 Posts	Capital Gains Tax Query Calling all tax experts... Hello. Hopefully this is a relatively simple problem: SWMBO bought her flat in Dec 2003 and it was her only home. She moved out in Sept 2006 when we bought a house together with a joint mortgage. The flat has been let since Feb 2007 paying into her seperate mortgage so she has some rental income to declare but will she owe any CGT on it if she sells it soon? I've contacted several local accountants but no ones got back to me yet. Info on the t'interweb is sketchy and alot of it related to tax year 2007 - 2008. I even rang HMRC direct and they told me they give 3 years from moving before you have to pay any but for some reason I'm still sceptical! I look forward to any info - especially if it confirms she doesn't have to pay any CGT! Cheers. __________________ They call me; Luke, Lukey or even Lukeyman! Last car: Fabia vRS - Black Magic - Sniff... New car: '82 Mk1 Fiesta - all 957 throbbing cc's of it!

15-08-2008, 12:37	#2
nokiauk Briskodian Join Date: Jul 2004 Posts: 249 Members Car: Saab 93 Vector Sport TDI Thanks: 10 Thanked 3 Times in 3 Posts	Re: Capital Gains Tax Query Not an expert but in a similar situation As far as I know as its not her only property (she now owns one with you) she will be liable for tax on any of the gain in value from when she moves out will date of sale. I can't say how much the value will have gained by 18% is payable and expenses I'm sure can be deducted. Something like this Value in 2006 - £150k Value now is - £190k Gain is 40k Say you selling costs come to £3k that leave you with 37k You also have a personal allowance of I think £9,800 which would bring it down to £27,200 That would have a capital gains tax of £4,896 which isn't too bad. There is some other costs involved but not sure but it involved purchase price etc as well. Someone else may be better placed but thats roughly what my lawyer told me.

15-08-2008, 12:43	#3
foureyes Briskodian Join Date: Sep 2006 Posts: 297 Members Car: Fabia vRS, Black & STD Thanks: 16 Thanked 7 Times in 7 Posts	Re: Capital Gains Tax Query Thats what we've been basing our calculations on too. To be able to claim my CGT relief I'd have to get put on the deeds of the flat and its mortgage. Which I've spoke to the solicitors and building society about and it isn't a problem - just a solicitors fee of about £280. I explained the joint house to HMRC when I rang up and she still pointed out the 3 years grace period on the original property. But she did also recommend I check a helpsheet on their website which was out of date... __________________ They call me; Luke, Lukey or even Lukeyman! Last car: Fabia vRS - Black Magic - Sniff... New car: '82 Mk1 Fiesta - all 957 throbbing cc's of it!

15-08-2008, 12:46	#4
nokiauk Briskodian Join Date: Jul 2004 Posts: 249 Members Car: Saab 93 Vector Sport TDI Thanks: 10 Thanked 3 Times in 3 Posts	Re: Capital Gains Tax Query yes I'd forgot about that, makes sense as you 'll then have 2 x allowance, but may not save that much as if you name is added now then your half of the house will gain little or no value so not much tax to pay if any

17-08-2008, 07:46	#7
carly2237 Briskodian Join Date: Jul 2005 Location: North East UK Posts: 153 Members Car: Octavia VRS MkII Thanks: 2 Thanked 7 Times in 6 Posts	Re: Capital Gains Tax Query No CGT - She will be 100% principle private residence relief. The 3 years grace relates to the last 3 years of ownership qualifying for PPR even if no occupancy. If you search Principle Private Residence on google or HMRC website it should give you all the details. __________________ Fabia VRS Black Magic ... no mods

17-08-2008, 08:54	#8
nokiauk Briskodian Join Date: Jul 2004 Posts: 249 Members Car: Saab 93 Vector Sport TDI Thanks: 10 Thanked 3 Times in 3 Posts	Re: Capital Gains Tax Query Just wondering now if I will be liable for any after reading here. I own my own property and have done for the last 3 years. 50% of my Grans property got transferred to my name last year (April/May), unfortunately she died earlier this year and the house is now up for sale and I am due to receive 50% of the sale price. Will I be liable as I already own my home and this is effectively a 2nd property. Solicitor was of the opinion that as the house hasn't gained any value in the year I owned it then there would possibly be none if little tax for Capital Gains?

17-08-2008, 09:19	#9
carly2237 Briskodian Join Date: Jul 2005 Location: North East UK Posts: 153 Members Car: Octavia VRS MkII Thanks: 2 Thanked 7 Times in 6 Posts	Re: Capital Gains Tax Query You can only have one PPR at any one time therefore the disposal of your share of the 2nd property will be liable. However if this has made little or no gain on the market value you acquired your share at last year then this will likely be well below your annual exemption so no CGT to pay. Solicitor sounds right. __________________ Fabia VRS Black Magic ... no mods

19-08-2008, 12:11	#11
carly2237 Briskodian Join Date: Jul 2005 Location: North East UK Posts: 153 Members Car: Octavia VRS MkII Thanks: 2 Thanked 7 Times in 6 Posts	Re: Capital Gains Tax Query Provided that your girlfriends house at some time was her only main residence (Dec 03 to Sep 06) the last 3 years of ownership are always exempt in calculating capital gains tax, whether she is living there or not. The position for NokiaUK is different because his Grans house was never his only main residence at any time. The PPR rules have remained unchanged for some time so dont worry if the advice you find is not specific to 08/09. Its a pretty complicated area and HMRC should be able to provide you with helpsheets and guidance through their website. __________________ Fabia VRS Black Magic ... no mods

19-08-2008, 12:16	#12
carly2237 Briskodian Join Date: Jul 2005 Location: North East UK Posts: 153 Members Car: Octavia VRS MkII Thanks: 2 Thanked 7 Times in 6 Posts	Re: Capital Gains Tax Query Private residence relief: computation of relief: introduction This is a good place to start on the HMRC website and then if you need further info simply search for the CGxxxxx numbers in the website search bar. Good Luck __________________ Fabia VRS Black Magic ... no mods

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