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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am an agent working client who recently sold her house

Resolved Question:

I am an agent working for a client who recently sold her house for £335,000. She purchased it in July, 2004 with her then husband for £240,000. They lived in the house
until April, 2007 when they moved into accomodation provided by his employer. They let the house from April, 2007 until March, 2014. In the intervening period she paid him
£99,000. for his interest in the house.(Payment September 2010). When she sold the
house in December 2014(Completion.date.11th.December.)she had to pay Solicitors costs of £1,248. and Estate Agents fees of £4,020.
How much will the Capital Gains Tax Liability be and will she be entitled to the Annual Exemptions re Private Residents relief. Please note that her house was let to tenants for the period April, 2007 to March, 2014, and was empty for the period April, 2014 to date
of sale(11th December 2014). Hope you can help. Many thanks. Customer.
Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

Can you tell me what job your client's former husband was doing which required him to live in accommodation provided by his employer. Can you confirm that when the £99,000 was paid, the couple separated.

TonyTax and other Tax Specialists are ready to help you
Expert:  TonyTax replied 2 years ago.
If you can let me have the information i asked for in my last post, I will be able to fully answer your question.
Customer: replied 2 years ago.

To: TonyTax.

With regard to my clients CGT situation, can she offset Land Registry Document Fees, Land Charges Search Fees and Council Tax(For

the period April, 2014 to 11th December, 2014(Date of completion

of sale of house) and replacement of Carpet/(s) as well as any utility

bills for the period the house was empty?

Many tks.

Arnold Hickson.

Expert:  TonyTax replied 2 years ago.
The Land Registry fees can be claimed but not Council Tax, the cost of replacement carpets or the utility bills.

It's possible that the main residence exemption claim can be extended to 2010 if your client and her husband were living in job related accommodation. Take a look here for more information.

I cannot see my original answer so here it is again:

Hi.

I'm assuming that your client did not reoccupy the property after having moved out in 2007 before it was sold in December 2014.

Your client made a gain of £110,732 when she sold the property (£335,000 - £120,000 - £99,000 - £1,248 - £4,020). The gain will actually be less if stamp duty and/or survey fees were paid. It was owned for 126 months of which your client lived in it for 33, it was let for 84 and it was vacant for 9.

The gain for the period the property was your client's main home will be exempt from CGT as will the gain for the last 18 months of ownership. That accounts for £44,820 (£110,732 / 126 x 51 months). The remaining non-exempt gain is £65,912 and this covers that part of the letting period not covered by the last 18 months of ownership (£110,732 / 126 x 75).

As the property has been both your main home and let, your client will be entitled to a further deduction called letting relief which will be the lesser of:

1 £40,000,

2 the gain for the period that the property was your client's main home, £44,820 and

3 the gain for the letting period, £65,912.

Letting relief of £40,000 will reduce the remaining non-exempt gain of £65,912 to £25,912 and the annual CGT exemption of £11,000 will reduce if further to leave your client with a net taxable gain of £14,912.

There are two rates of CGT, 18% and 28%. The rate or combination of rates that your client will pay will be dependent on the level of her income in the tax year that the property was disposed of, 2014/15. One of the following scenarios will apply:

1 If the sum of your client's income and the net taxable gain in 2014/15 was £41,865 or less, then all the taxable gain will be charged to CGT at 18%.

2 If your client's income alone in 2014/15 was £41,865 or more in 2014/15, then all the taxable gain will be charged to CGT at 28%.

3 If your client's income alone in 2014/15 was less than £41,865 but greater than £41,865 when the net taxable gain is added, then part of the net taxable gain will be charged to CGT at 18% and part at 28%.

I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.

Hi TonyTax.

Further to my earlier requests, and your answers, are the costs

for calculating the net profit(i.e.Legal/Accountancy/Professional)

allowable against the final Tax Liability.If so, how do suggest that

I word the relevant invoice?

Many thanks for your help.

Customer.

Expert:  TonyTax replied 2 years ago.
You can claim for the costs of the purchase and sale (legal fees, stamp duty, survey fees, selling agent fees etc). As far as accountanucy costs are concerned, you cannot claim for a fee charged for the calculation of the gain but you can claim for the fees associated with agreeing the tax liability with HMRC if there is a dispute for instance or for fees as set out in CG15280 here.
Customer: replied 2 years ago.

Hi TonyTax.

The figure of £99K which I have been telling you about was a figure

that I took from my client's ex husbands Tax-Return for 2010-11.

However I have now been advised that this figure is part of a payment

of £100,320.82 which was shown on a court order dated July, 2010,

and this sum was paid to him during the same month.

It would appear from said tax-return that £1,000. of this figure

of £100,320.82 amounted to "Legal costs on Transfer". Could this

WHOLE amount of £100K + be offset against her Capital Gains

Tax liability given that the payment was made due to a court order?

Looking forward to your early reply. Will, of course endeavour to

get more detail of balance of £1,320.82(£100,3.20.82-£99,000.00)

if necessary.

Many thanks for your assistance.

Customer-Agent.

P.S. Will deal with your payment side of things on reply.

Expert:  TonyTax replied 2 years ago.
I would claim the legal costs in the same way that you would claim legal costs in a purchase from an unconnected third party but only to the extent that they relate to the acquisition of the property. I would expect HMRC to disallow any costs related to the settlement itself.
Customer: replied 2 years ago.

Hi Tony.

Unfortunately rating "Face" has not appeared so that I can rate

your work, which is of course satisfactory. Please reply to this e-mail

(with face) so that I can rate you and you get paid.

Many thanks.

Philip.

Expert:  TonyTax replied 2 years ago.
I don't know why the rating face hasn't appeared as I posted an Answer as opposed to an Info Request. I will ask just answer to look at it and get back to you.
Expert:  TonyTax replied 2 years ago.
Hi again.

Just Answer have informed me that as you are a subscriber to just answer, you can only rate an answer once.
Customer: replied 2 years ago.

Hi Tony. So this means that all you have received for answering

my questions is only £14.70? Is there any way we can make this up

to, say £25.00?

Regards.

Philip.

Expert:  TonyTax replied 2 years ago.
You paid me $29.39 plus a generous bonus of $15.42. That's over £25.
Customer: replied 2 years ago.

O.K. Tony Tax. Please now cancel my subscription to Just.Answer.UK

Tax with immediate effect and confirm. Many thanks for your kind

assistance and prompt responses.

Best wishes.

Philip.

Expert:  TonyTax replied 2 years ago.
I cannot cancel your account I'm afraid. You will need to do that from here.
Customer: replied 2 years ago.

Hi Tony Tax.

Tks. for your various answers to my questions. I have just one

more(I think!) and that is as follows.

With regard to the Tax percentage that my client will have to pay re

CGT., will HMRC calculate this on her GROSS earnings(i.e. BEFORE

her Personal allowance) or on the TOTAL of her earnings as set out below.

GROSS INCOME FROM EMPLOYMENT £27,300

CAPITAL GAIN ON SALE OF HOUSE £14,907

_________

£42,207

=========

If this was the situation RE the CGT Rate, she would be charged

CGT at 28%. If, however, her Personal Allowance could be included,

then the following picture would be relevant.

GROSS INCOME FROM EMPLOYMENT: £27,300

LESS PERSONAL ALLOWANCE: (£10,140)

--------- ________

TAXABLE INCOME: £17,160

PROFIT ON SALE OF HOUSE £14,907

________

TOTAL INCOME: £32,067

========

Will her Tax Liability for 2014-15 be calculated on £42,207(at 40%)

(£31,866-£150,000.) or £32,067(@ 20%)?(I am hoping that I can

get some more expenses to reduce her Capital Gains Tax profit

to below £14,705.)

Looking forward to your answer.

Warmest regards.

Customer.

Expert:  TonyTax replied 2 years ago.
The figure of £41,865 is comprised of the £10,000 personal allowance and the 20% basic rate tax band of £31,865. Add the gross income to the net taxable gain and compare the result to £41,865. Any part of the gain over £41,865 will be taxed at 28%. Any part of the gain below £41,865 will be taxed at 18%.
Customer: replied 2 years ago.

23/06/2015.

Hi TonyTax.

Tks.for your answer. I have now calculated the final figures and

believe that her allowable expenses of £140.00(ONE-HUNDRED

AND FORTY-POUNDS ONLY) can also be taken into the calculations.

If so, I think that the following situation is relevant.

BASIC TAX RATE BAND 31,865

PERSONAL ALLOWANCE 10,140

-----------

£42,005

=======

GROSS INCOME: 27,300

HOUSE SALE PROF 14,907

---------

£42,207

(42,005)

_______

TAXABLE AMOUNT AT HIGHER

RATE (C.G.T.) £ 202

=======

£202. X 28%: £56.56

=======

42,005

(27,300)

_______

£14,705

========

£14,705 X 18%: £2,646.90.

=========

SUMMARY.

==========

TAX.

=====

Taxable Profit at Higher Rate(28%) £202.00 56.56

Taxable Profit at Lower Rate(18%) £14,705 2,646.90

_________

£2,703.46

=========

Tony, as I have said before, is there any way I can pay you some more money for all your very helpful advice? If possible, pse.reply

and send me the smiley face, (although your previous explanation

was very understandable.)

Best regards.

Customer.

Expert:  TonyTax replied 2 years ago.

I would just deduct the £140 expense from the gain.

There really is no need to pay me again. The only way that you could do that is by posting another question which mentions your name and stipulates that only I should answer it. I cannot get another smiley face on this question I'm afraid.

Customer: replied 2 years ago.

Hi TonyTax.

Many thanks for your kind help.-Message understood.

Customer.

Expert:  TonyTax replied 2 years ago.

Thanks and good luck.