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HMRC and CGT

Customer Question

HMRC and CGT

Hi

Person Mr. A owned one property purchased in 2000 and lived there for 5 years but at the same time also lived at his parents house. Mr A left all his correspondence at parents house (bank statements, council tax, electoral register etc). After 5 years the property was let for 10 years. Then sold in 2015.

For the purpose CGT after disposal of property what will HMRC accept to prove Mr A's residency at the property for the first 5 years?

Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. For the first five years of ownership Mr A is entitled to Private Residence Relief (PRR) as he lived there. The fact that he also used his parental home from time to time is irrelevant. For CGT purposes PRR is given automatically by HMRC and no supporting evidence is required. The only CGT incurred will be for the let out period of 10 years less the last 18 months when an owner is deemed to be in occupation even if this is not the case. Total ownership period is 180 months. Total letting period, after allowing the last 18, is 102 months. 180 - 102 = 78. 78 / 180 = say 43% so only that percentage of the gain is exposed to CGT. From that figure deduct up to 40K of Lettings Relief and the balance is chargeable at 18% or 28% or a combination of the two rates depending on Mr A's income including the gain in the tax year of sale. I do hope that I have been able to shed some light on Mr A's situation.
Customer: replied 1 year ago.

Thanks.

Just for further clarification.

During the 5 years of occupation Mr A let out a room generating an income below taxable amount (I think 4,200 or so) therefore Mr A did not declare to HMRC as it was not required.

Mr A allowed his tenants to register on council tax list and electoral register. But Mr A himself did not register on the council tax list or the electoral register at that property as he was on the list at his parents house.

Wouldn't HMRC pull out the details on the council tax list and electoral register and argue that as Mr A does not appear on the lists therefore it will be deemed that Mr A did not reside there but it was the tenants that resided there over the course of the 5 years, and subsequently argue that the property was a let property?

Expert:  bigduckontax replied 1 year ago.
No that Department will not be the slightest concerned. A person can be on the electoral roll at several addresses and that is perfectly legal providing they only exercise their vote once at each election.
You are worrying over nothing. On sale HMRC will accept the situation that Mr A was in occupation for 5 years and then let the property out. This sort of situation happens every day.
Customer: replied 1 year ago.

OK thanks.

Do you provide services to calculate CGT and submit tax return through your company?

Expert:  bigduckontax replied 1 year ago.
Well we do, but it doesn't come cheap!
bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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