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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3814
Experience:  FCCA FCMA CGMA ACIS
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I have been running a care home with special needs

Customer Question

I have been running a care home for people with special needs for over 20 years , and the business is coming to a natural end soon as I now only have one resident and when she leaves me ( either by moving to another home or possibly dying soon ) I am going to cease the business all together. I have claimed half of the running costs of the house against the income so my question is, will I have any capital gains to declare ?
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. Presumably you live in the house which is also the care home? Am I correct, and is it your sole or main domestic residence? Once I have this information I will be in a position to advise you further.
Customer: replied 1 year ago.
Yes I live in the house and it is my sole domestic residence
Expert:  bigduckontax replied 1 year ago.

Thank you, ***** ***** will be liable for Capital Gains Tax (CGT) when you eventually sell your house, but not until that time. Furthermore only the proportion of the dwelling that was used as a care home attracts CGT. Thus some calculations will be needed. I would suggest that the equitable way to do this is work out the floor areas occupied by you as your sole or main domestic residence and that used by your customers. The part used by you entitles you to Private Residence Relief (PRR) at 100%. The balance will attract CGT on the gain on disposal.

The gain is the difference between the acquisition and disposal price at the appropriate proportion (see above). The disposal price is the selling price less cost of sale. The acquisition price is what you originally paid for the dwelling plus purchase costs (including stamp duty) plus improvements eg installation of double glazing, central heating, extensions, but not routine maintenance part of which can be offset against fees received. You are deemed to be in residence for the last 18 months even if this is not the case. This may not be of much use to you depending on the final sale date viz a viz the business use. You are also entitled to Annual Exampt Amount (AEA) of 11.1K to offset the gain.

The proportion of the gain you make may attract Lettings Relief (LR) of up to 40K, but must not exceed the PRR benefit you derive. Also, if you are entitled to LR you loose your AEA; you can't have both, just one of the other.

Phew; I hope you are still with me. In essence you are liable to CGT on a proportion of the gain and this is at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. There is no liability before that time.

I do hope my reply has been of assistance. If you want to read all about it here is the link to the relevant Gov UK web site and it's a good read for a wet weekend; it's raining here!

https://www.gov.uk/tax-sell-home/let-out-part-of-home

bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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