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My wife and I bought a house (joint names wife and I) for our

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My wife and I bought a house (joint names wife and I) for our daughter to live in with her boyfriend. Relationship failed so decided to rent for a year. After the year of rental decided to sell. My wife and I declared the profit from rental and have paid tax for it in 2012-13. What are our capital gains tax liabilities now that we have sold it. Time line as follows
November 2010 bought house for £51000
Major renovations, damp proof, electrics, plumbing heating, plastered throughout etc - cost approx £30000
Rental period 1/4/2012 to 31/3/2013 - rental charge £450 per calendar month - profit (taxed) £2200
House vacated and remedial decoration etc - put on market
Sold for £71000 September 2013 (costs of solicitors, insurance, community charge etc approx £3500)
Do we have any liability for capital gain tax?
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.
Hi.

The period of letting has no impact on the calculation of the gain or loss on the sale of the property.

You appear to have made a capital loss of some £10,000 (£71,000 - £51,000 - £30,000). This is on the basis that all the work you did which cost £30,000 can be said to have improved the property as opposed to it being regular repairs and maintenance expenditure. The purchase and selling costs (legal fees, survey fees, stamp duty, sellig agent fees etc) can be claimed which will increase the loss. Council Tax cannot be claimed in the calculation of the loss. There can be no CGT to pay if you have made a capital loss which you appear to have done.

It would be worth claiming the loss via your tax returns if you complete them or by letter to the tax office if you don't so that you can use it if you make taxable capital gains in the future. HMRC may ask to see proof of improvement expenditure.

I hope this helps but let me know if you have any further questions.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15840
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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