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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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My wife and I purchased a new home in 2006 in Aberdeen,

Resolved Question:

hi,
My wife and I purchased a new home in 2006 in Aberdeen, scotland, we stayed in the house for 2 years before I was posted abroad by work in 2008. We kept the house as we intended returning after the 2 year assignment. In 2010 we were returned by work to the UK but the role was based in London. we intitally rented in London but after a year (in Nov 2011)decided to buy a house in London and sell the one in Aberdeen.
however, we had a tenant in the house in Aberdeen so could not sell at the same time as we bought in London. we ended up selling the Aberdeen property 2.5 years later in august 2014.
we made a gain on the property of around 100k.
do we quaify for relief on the Aberdeen property or do we have to pay CGT
thank you stuart
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Can you tell me the month in 2006 that you bought the property, the month in 2008 that you moved out to live and work abroad, the month and year the property was first let and the month and year when the letting ended please.
Customer: replied 1 year ago.
We bought the property in August 2006. Left for the USA in August 2008
Rental started in sept 2008 and it was rented until July 2014. We sold in sept 2014.
Expert:  TonyTax replied 1 year ago.
Thanks.

Leave this with me while I do some calculations.
Expert:  TonyTax replied 1 year ago.
Hi again.

Assuming that you didn't reoccupy the property on your return to the UK before the property was sold (the fact that it was let would suggest that you didn't) and that you didn't make an election for the first property to be treated as your main home for CGT purposes within two years of buying the second, you won't qualify for full main residence relief which your absence for work commitments would have given you. See the notes starting here. However, all is not lost as you will see below.

If you made a £100,000 gain, it will be divided between tax free and taxable sums for each of you and your wife as follows::

Exempt gain £21,939 (£50,000 / 98 months x 43 months (25 + 18))

Non-exempt gain £28,061 (£50,000 / 98 months x 55 months (73 - 18))

Letting relief £21,939 (lesser of £40,000, £21,939 and £28,061)

Taxable gain £6,122 (£28,061 - £21,939)

Annual CGT exemption £11,000

Net taxable gain £0

Take a look at HS283 here for information on the main residence and CGT.

I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thanks.
So are you saying that there is no capital gain tax due. ? Could you expand a little on the calculations below, i.e. How did you calculated the various months?
Expert:  TonyTax replied 1 year ago.

CGT £0 means no CGT is payable.

Period of occupation - August 2006 to August 2008 25 months. Add last 18 months of ownership.

Period of letting and vacant - September 2008 to September 2014 73 months. Deduct last 18 months of ownership.

Customer: replied 1 year ago.
Thanks for that.
So when I fill in my self assessment tax return how do I document this ?
Is there a form to fill out which allows me to show your calculation ?
Expert:  TonyTax replied 1 year ago.
You use the SA108 pages.

If you use the online HMRC tax return software, it has a proforma worksheet you can use which is converted into a PDF document and submitted with your return.

Not that you need them as you have no CGT to pay, but you can claim the purchase and sale costs (legal fees, survey fees, stamp duty, selling agent fees etc) against the gain of £100,000 if you haven't already accounted for them.
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