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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
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Experience:  International tax
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My husband was a sole trader and worked from home. He died

Customer Question

My husband was a sole trader and worked from home. He died of cancer after a long battle and I now find I have three years income tax returns to complete and am struggling.
He worked on the dining room table but also had a desk, computer and files in the attached garage which had partially been converted (window instead of door). The roof of said garage leaked badly and the boiler which was in there also leaked. the room was also used as a family computer room. We had the roof replaced, the boiler moved and found that the floor also needed replacing (other work was also needed). if I claim for the roof and floor on the business will I be liable for capital gains tax when I sell the house? I am claiming for a proportion of the mortgage and utilities bills
Submitted: 2 years ago.
Category: Tax
Expert:  TaxRobin replied 2 years ago.
Hello and thank you for posting your question,
Your principle private residence is exempt from capital gains but your home office won’t be if its exclusively used for business, but it will only be a small proportion of the property value.
If your husband was a sole trader and there was a private use element to his home office then the office will be exempt.
The costs for the roof and repairs must be solely for business use then you can claim this via your husband's company. If you do claim them then it is exclusive and the capital gains would be applied. Again the garage/office would be a small portion of the total sell.
So sorry you have to deal with all this now after your husband's passing. You may wish to have a tax professional assist you with the completion of the past years.
Customer: replied 2 years ago.

I am still not sure which way to go with this. What proportion of the sell price do you think would be applied to the garage/office? His will states that his estate is held in trust for the children by me and I am allowed to buy a dwelling for myself and youngest child using his half of the equity and my own. I can split the repair costs between the years

Expert:  TaxRobin replied 2 years ago.
The portion would depend on the entire cost. Your use of the same percentage that you used for utilities may apply.
As far as the trust issues, you would need to speak to a solicitor.
I can advise on the taxation and the claim for business. If you do claim the garage is exclusive business then the sale on it would be capital and you would be allowed the full costs for the repairs to claim on those back years.
You may want to have a tax professional go over the numbers and see which way is going to benefit you more (claiming full business or the saving on capital). It may be that the claim on capital and full business results better. The garage is going to be a smaller % or area then the house.
Customer: replied 2 years ago.

We have been in this house for about 27 years so obviously the value has increased greatly. He did not work from home all these years but I have been unwell for many years myself and am unsure of the dates. It would be at least 10 though. Does the capital gains apply to the whole increase in value over all of the time we have lived here?

Expert:  TaxRobin replied 2 years ago.
The capital gain would only apply to the portion of the sale that involves the garage (providing you claim it to be full business). The gain would be the difference in cost and sale amounts. There is also the Entrepreneurs' Relief you may can claim on qualifying gains.
Another expert offered the advice that in their recent dealings the HMRC were receptive to any penalties based on health issues.
This should give you some additional peace of mind on any of those concerns.
Customer: replied 2 years ago.

Ok you have lost me a bit there. Not being sure of the dates say for example the garage doors were replaced by windows 10 years ago and the garage then became used as an office, does the proportion of the house that is the garage become liable for capital gains on the value of the house 10 years ago till sale or from first purchase price 27 odd years ago till now? Also what is Entrepreneurs' Relief and how is it used?

Expert:  TaxRobin replied 2 years ago.
You only pay tax on any gains made since 31 March 1982. So if you owned an asset on 31 March 1982, you work out the gain or loss using its value at that date instead of its actual cost.
I may have spoke too soon about the Entrepreneur Relief.
Entrepreneurs’ Relief is available to individuals and some trustees of
settlements, but it is not available to companies or personal resentatives of deceased persons. So you may not be allowed that as husband has passed.

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