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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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I bought a Flat 4 in Oxford in May 2000 purchase

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Hello
I bought a Flat 4 in Oxford in May 2000 for a purchase price of £75,000. I had associated expenses with the purchase of £318.50 in service charges, £528.75 in Legal fees and disbursements of £911.02. Total purchase price was therefore £76,758.27. I occupied the flat for the first 67 months of ownership, leaving it vacant for the next 7 months until July 2006. At this time I spent an additional £5,200 on the flat to renovate and make it suitable for commercial renting (I cant unfortunately find these receipts). The property was then rented continuously for 101 months from May 2000 until Jan 2015, when I asked the tenant to move out. I eventually sold it in April 2015 for a selling price of £168,000. Estate Agent fees were £1000 and Legal and disbursements £873, so the gross money received for the property was £166,127. With an initial purchase price of £76,758.27 and renovation improvement costs £5,200, the total expenditure totalled £81,958.27, giving a profit of £84,168.73. I lived in the flat for the first 67 months of ownership, with the property then vacant for the 7 months following. I then rented the property whilst seeking to sell it, for a further 101 weeks, with the property vacant for 4 months at the end as my final sale went through in April 2015. I therefore owned the property for a total of 179 months. Private Residents Relief computations for my property is therefore 67 months plus the ‘extra’ 18 months (Final Period of ownership).
This gives 85 months out of total 179 months of ownership, which translates into 47.48% of the taxable gain being tax exempt. This translates into £39,968.39. The remaining £44,200.34 taxable gain can be treated with Letting Relief (LR) for the 101 months the flat was rented less the 18 months attributed to the PRR (see above). This gives 83 months attributable to the letting period, therefore 83/179 = 46.36% times the profit, giving an LR figure of £39,020.62. This LR figure is the lower of the attributable PRR gain, the PRR figure being £39,968.39 and additionally lower than the £40,000 (standard rate). This means that the residual taxable gain after PRR of £44,200.34 is further reduced by £39,968.39 to £5,179.72. This remaining taxable gain is then covered under my annual £11,000 CGT allowance.
Am I correct and should have no CGT to pay? Thanks.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me check your workings and I'll get back to you.
Customer: replied 1 year ago.
Many thanks. Sorry about the 4 typo on the first line, it was only 1 flat! Jon
Expert:  TonyTax replied 1 year ago.
No problem.
Customer: replied 1 year ago.
Just to add I fully declared all my profit to the tax man and paid the 40% extra tax for the 9 years it was rented. I have all the buying and selling documentation, detailing all those figures, but am missing the receipts related to the modest renovations I did to the flat before renting, which was a new shower and bath uni, new carpeting and fitted kitchen elements, all which were still in good nick when I sold, so contributed to the overall value of the flat.
Expert:  TonyTax replied 1 year ago.
Hi again.
I have slighty different figures to you. I would take 4 months off the vacant period and 14 months off the letting perid, a total of 18 months at the end of your ownership and add those to the occupation period so you end up with the following:
Occupation period 67 months plus last 18 months: 85 months £39,969
Letting period: 87 months £40,909
Vacant period:7 months £3,291
Letting relief £39,969
Taxable gain £4,231
CGT £0 (Gain covered by annual exemption)
I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Many thanks for that. I am assuming that your suggested variations simply a different way of presenting it and mine isn't necessarily wrong but you would suggest using your figures? Jon
Customer: replied 1 year ago.
Do you also think I might struggle not having receipts for the work I did on the flat?
Expert:  TonyTax replied 1 year ago.
The likelihood si that you won't be asked to produce receipts, though it is possible. If you have photographic evidence that may help but even if it was all disallowed, you would still have no taxable gain after deduction of the annual CGT exemption assuming you have no other gains.
Expert:  TonyTax replied 1 year ago.
I have never had my method queried. Strictly, letting periods and vacant periods should be kept apart unless a vacant period is between two letting periods where the property is available for letting.
Customer: replied 1 year ago.
Hello
Sorry for the delay in getting back to you. Your help much appreciated. In your last comment, are you suggesting that I shouldn't mention the last 4 months of ownership when the flat was vacant? Simply reducing my overall ownership period by 4 months? . Do you suggest that I simple detail my computations as I have in my initial question to you and put this in the 'additional info' box in my self assessment on line form or add an enclosure with an xl spread-sheet detailing the various periods of letting and rent? Another small point, apologies, but when I have filled in but not yet submitted my on line form there is a drop down menu when I am asked to choose an allowance by which to offset my CGT. This only allows for one type of allowance to be chosen and I am legitimately claiming both PRR and LR. All mentioned in my further details, but concerned that the system doesn't want to allow more than one allowance. Thanks again Jon
Expert:  TonyTax replied 1 year ago.
The last four months was a vacant period which is not eligible for letting relief but it is covered by the last 18 months relief which leaves 14 months to come off the letting period. As there is no tax at stake, you could use your calculations but I don't count a vacant period as a letting period unless its a small gap of time between letting periods.
If you look at page CGN3 of the notes below you will see that you should use the LET code for main residence and letting relief. Letting relief is dependent on occupation by the owner as their main home at some point. Witjout it, there can be no letting relief:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/420007/sa108-notes-2015.pdf
Customer: replied 1 year ago.
Thank you. Separate spreadsheet submission or within the body?
Jon
Expert:  TonyTax replied 1 year ago.
You could use the HMRC worksheet in the online tax return software which will give HMRC all they need (the preferred option) or use your own sheet which you would need to convert to a PDF to be able to attach to your return or you could try to fit it all into box 37.
Customer: replied 1 year ago.
Thanks again. Last one hopefully, in your response here:
Occupation period 67 months plus last 18 months: 85 months £39,969
Letting period: 87 months £40,909
Vacant period:7 months £3,291
Letting relief £39,969
Taxable gain £4,231
CGT £0 (Gain covered by annual exemption)I am not clear how you get from the £40,909 LR figure to the Letting relief figure. Clearly 87 divided by the 179 weeks gives you the £40,909 figure, but then you have a LR figure of £39,969.Is the difference something to do with the £3,291 figure you have apportioned to the 7 months vacant period? I was going to say that the initial figure was over the £40K mark, as that would affect it, but I think its that I don't understand the implications of the vacant 7 months and how that reduces the LR to the figure you have and below the £40K, sorry for the questions. Jon
Expert:  TonyTax replied 1 year ago.
Letting relief in your case is the lesser of:
1 £40,0000,
2 the gain for the period of occupation and the last 18 months of ownership, £39,969 and
3 the gain for that part of the letting period not covered by the last 18 months of ownership, £40,909.
You don't claim letting relief for a vacant period after the final cessation of the letting.
Customer: replied 1 year ago.
Thanks again. Could I therefore just ask you to look at this redrafted last paragraph submission and see if you think this reflects both your advice and also would be acceptable as my submission? Please suggest any changes where perhaps my language is incorrect?
"I lived in the flat for the first 67 months of ownership, with the property then vacant for the 7 months following. I then rented the property whilst seeking to sell it, for a further 105 weeks until the final sale went through in April 2015. I therefore owned the property for a total of 179 months. Private Residents Relief computations for my property is therefore 67 months plus the ‘extra’ 18 months (Final Period of ownership). This gives 85 months out of total 179 months of ownership, which translates into 47.48% of the taxable gain being tax exempt. This translates into £39,968.39. The remaining £44,200.34 taxable gain can be treated with Letting Relief (LR) for the 105 months the flat was rented less the 18 months attributed to the PRR (see above). This gives 87 months attributable to the letting period, therefore 87/179 = 48.60% times the profit, giving a Letting Period figure of £40,909. Letting Relief refers and applies to the lesser figure between £40,000, the letting period figure (£40,909) and the Occupation Period figure (£39,968), so LR in this case applies to the £39,969. This leaves a remaining taxable gain of £4,231, which is covered by my annual exemption."
Thanks Jon
Expert:  TonyTax replied 1 year ago.
That's fine given that no tax is payable whether you do it your way or my way.
You did say in your original question that the property was empty for the last 4 months of ownership which means that the actual period of letting was 101 months, not 105. It's a minor difference not worth worrying about.
Customer: replied 1 year ago.
Thank you.
Expert:  TonyTax replied 1 year ago.
Thanks and good luck.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15838
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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