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My father bought his detached four bedroom house in 1971.

Customer Question

Hi, My father bought his detached four bedroom house in 1971. In the early 80's he built a granny flat for my widowed grandmother to exclusively use, above the double garage which is attached to the main dwelling. The flat is accessed from the garage and has a bedroom , living room, bathroom & kitchen. In 1988 approx 1 year after my grandmother died my parents started to let the flat. My mother died in 2013. As of June 2015 the flat is unoccupied but my father intends to let it again in due course.
Can you confirm whether my father has any CGT liability in relation to the Granny flat.
Thank you & regards
Julian Dunn
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello Julian, I am Keith, one of the experts on Just Answer, and happy to be able to help you with your question. No CGT would be liable until the granny flat was sold at some future indeterminate date. In order to create an entitlement to Lettings Relief, available up to 40K, your father would be advised to occupy the flat for a period, say 6 months. Otherwise any CGT would only be entitled to relief through the Annual Exempt Amount, currently 11.1K. There would be a time proportional adjustment for the period of your grandmother's occupation providing she entered before 5 April 1988. I do hope that I have been able to shed some light on the position. Currently there is no CGT due, but it hangs like the Sword of Damocles over the granny flat.
bigduckontax, Accountant
Category: Tax
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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