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taxadvisor.uk
taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4811
Experience:  FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
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I bought a family home in 1996 for £49.950.00 and lived in

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I bought a family home in 1996 for £49.950.00 and lived in it until 2006 with my family
It was valued in 2006 at £160.000.00 this was when I started to rent it out with a buy to let mortgage
I have rented it out since that date keeping accounts and doing my own self-assessment every year
I sold it in Jan 2014 for £158.000.00
Total losses up to April 2013 are £ 5905.20 this was verified by my Tax return in April 2013
I have employed an accountant to do the final figures for April 13 to March 14 and she is telling me that I owe £5k in tax as the inland revenue are saying I have made £100k profit they are saying they take the figure of £49.950.00 and the price I sold it for even though I was living in the property as a residential family home from 1996 -2006 I only started to rent it out in 2006 and have made a loss most years
Is there anything I can do I was told back in 2006 I would only be liable for tax from the point of renting it out (2006 -3014) and with the expenses and losses I feel let down by it all
Submitted: 2 years ago.
Category: Tax
Expert:  taxadvisor.uk replied 2 years ago.
Hello and welcome to the site. Thank you for your question.

If you lived in the property as your only and main residence for the period 1996 to 2006 then this period would qualify for private residence relief.

In order for me to calculate your CGT please provide
- month in 1996 you bought the property;
- month in 2006 when you first let the property;

Did you spend any money on capital improvements
What were buying and selling costs including stamp duty, legal fees and agents fee if sold through agent?

Many thanks
Customer: replied 2 years ago.

1996 solicitors fees around 2k don't know stamp duty figure back then on 49950.00 not a lot I should think

I did not spend anything on capital improvements only maintenance etc

2014

selling costs in £3192 legal fees estate agent etc

the accountant says the inland revenue wont allow me all the private residence relief

thank you for trying to help am at my wits end

Customer: replied 2 years ago.

sorry

I first lived in it Oct 1996 and my first rent was july 2006

Expert:  taxadvisor.uk replied 2 years ago.
Sarah, thank you for your reply.

I will revert to you shortly.

Many thanks
Customer: replied 2 years ago.

ok thank yo

Expert:  taxadvisor.uk replied 2 years ago.
Sarah, thank you for your patience

The capital gains calculations would be as follows:

Main residence (Oct 1996 to Jun 2006) = say 117 mths

Rented period (Jul 2006 to Dec 2013) = 90 mths

Total period of ownership (Oct 1996 to say Dec 2013) = 207 mths

Property sold in Jan 2014

Relief available

Private residence relief = 117 mths

The final 36 months always qualify for relief up to 5 Apr 2014, even if you weren't living there, as long as it's been your only or main home at some point during the time that you've owned it.

Additional private residence relief = 36 mths

Total period of ownership =207 mths

Capital gain = 102,858 (158,000-(49,950+2,000+3192))

[I have rounded figures for ease of understanding]

Period covered by private residence relief (117+36) = 153 mths out of 207 mths

153/207 x 102,858 = 76,025

Gain subject to CGT (102,858-76,025) = £ 26,833

There is a further relief available called "Letting relief". This further relief is due where:

- you sell a dwelling house which is or has been your only or main residence, and

-

- part or all of it has at some time in your period of ownership been let as residential accommodation.

The maximum Letting Relief due

This is the lower of:

· £ 40,000

· £ 76,025 (the Private Residence Relief due)

· £ 26,833 (the gain on the part of the property that's been let) - (54/207 x 102,858) = 26,832

Gain chargeable to Capital Gains Tax after Letting relief (26,833-26,833) = £ nil

More information on private residence relief can be found here

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/323679/hs283.pdf

I hope this is helpful and answers your question.

If you have any other questions, please ask me before you rate my service – I’ll be happy to respond.

taxadvisor.uk, Chartered Certified Accountant
Category: Tax
Satisfied Customers: 4811
Experience: FCCA - over 35 years experience as a qualified accountant (UK based Practitioner)
taxadvisor.uk and other Tax Specialists are ready to help you
Expert:  taxadvisor.uk replied 2 years ago.
I thank you for accepting my answer.

Best wishes.
Customer: replied 2 years ago.

thank you for the figures I will take them to my accountant and challenge her decision

regards ***** ***** again

Expert:  taxadvisor.uk replied 2 years ago.
Sarah, thank you for your reply.

If you need further help, please don't hesitate to contact me.

Best wishes

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