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Sam
Sam, Accountant
Category: Tax
Satisfied Customers: 13869
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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My husband and I sold our flat in London years which

Resolved Question:

My husband and I sold our flat in London for 23 years which we had owned for 24 years.
We lived abroad for most of that time and rented it out for 11 of the 24 years. For the rest of the time either we or our adult daughters stayed there, including the last three and a half years when we became resident again in the UK and lived there ourselves.
Do we have to pay capital gains tax on the sale of the flat?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi Thanks for your question - I am Sam and I am one of the UK tax experts here on Just Answer (and am ex HMRC and now run an accountancy practice)Can you advise 1) The actual year the flat was bought2) the year you went abroad and whether this was for you or your husband work - and whether you purchased any property abroad3) the dates this was rented out and whether all rental income to declared to HMRC4) Did your daughters live or stay there and did they pay you rent?5) When you returned to the UK and whether you took residence up straight away6) Did you remain living there until the sale date I can then advise what capital gains might arise and what tax reliefs you would be due to mitigate any capital gains tax. Thanks Sam
Customer: replied 1 year ago.
Dear *****
The flat was bought in September 1991. We were already living abroad for my husband's work and needed a base in the UK as my daughters were at boarding school.
We rented the flat out from 1994 to 2003 (but not continuously - it was empty between tenancies) and from January 2010 to August 2011. We declared all rents to HMRC. Our daughters lived there and did not pay rent from 2003 to 2009,
We moved in in September 2011 and I took up residence immediately. My husband, who is Italian, took up residence in 2013.
We both lived there from September 2011 until the sale in January 2015
Customer: replied 1 year ago.
We didn't purchase any property abroad.
Expert:  Sam replied 1 year ago.
Hi Thanks for your response Then I am afraid there will be a capital gain (whether you had property abroad or not) but of the total period of ownership 280 months - the time you lived there (from Sept 2011 to Jan 2015) 40 months - will form an exemption from the total gain. (called private residence relief) your entitlement will be slightly more than your husbands. Plus you also will be due tax relief called private lettings relief to represent the months when the property was let out during 1994 to 2003 - so you will need to establish the dates the property was let and ensure this rental income was declared to HMRC this will then provide the lesser of1) the amount of gain on which private residence relief is due (equivalent of 40/280 x gain2) the amount of gain left over after private residence relief has been applied OR3) £40,000 This will be allowed (the private lettings relief) om each of your share of the gain (as the property owned in joint names) This is then deducted after the private residence relief has been applied and restricted to represent the time the property was actually let between 1994 and 2003 Then the first £11000 (as sold in 2014/2015) for both you and your husband (as the property was in joint names ) will be exempt and any remaining gain liable to capital gains tax. The rates of capital gains are 18% and/or 28% The rate is determined by what unused basic rate band you may have on annual income - so a higher rate taxpayer (income in excess of £41865) will be charged 28% - if your income is less than £41865 a year then some of the gain will be charged at 18% (to represent unused basic rate band, and then any remaining gain at 28%) And this should be declared to HMRC by 31/01/2017 at which point the tax will be due. As capital gains has to declared on a self assessment tax return - then if you do not already complete one, then you would be wise to alert HMRC as soon as possible, so they can ensure the appropriate return is registered for your completion after 06/04/2015) Do let me know if you require any clarification on the answer provided) Thanks Sam
Customer: replied 1 year ago.
I find this hard to understand. If I give you the figures can you give me an approximate sum we will have to pay?
The difference between purchase price and sale price was £580,000. Total costs - solicitors, stamp duty etc including purchase of share of freehold came to about £50,000. Can you explain how private letting relief and private residence relief would be applied to this sum?
Caroline
Expert:  Sam replied 1 year ago.
Hi Caroline If you wish me to make the calculation for you - this will I am afraid incur an additional charge (as per Just Answer policy) I would also need to know what each of your annual incomes is - let me know if you wish to proceed and I can send an additional services request Thanks Sam
Customer: replied 1 year ago.
No thank you, ***** *****'t asK you to do the calculation. I just don't understand what to do with the figure obtained by dividing 280 by 40.
How is this applied to the gain? Does it mean I reduce the gain by 0.142%?
How much is private residence relief and how is it applied?
Also is it sure that the tax would be due in Jan 2017 rather than Jan 2016.
Caroline
Expert:  Sam replied 1 year ago.
Hi The 30 months represents the time this was your main residence and the 280 represents the total ownership period - so to establish what gain you can apply the private residence relief upon you will need to reduce the gain so 40/280 (which yes equates to 0.14285% but this is just for you - your husbands private residence relief will be less than 40 months as it did not become his main residence until 2013 Then you consider private lettings relief which is simply the lesser of1) the amount of gain on which private residence relief is due (equivalent of 40/280 x gain) OR2) the amount of gain left over after private residence relief has been applied OR3) £40,000 Then you can apply private lettings relief on Then this lesser figure is applied, its a very straight forward process. But other than provide you with the formula I cannot put it any more simpler than I have and to make the calculation is time consuming (and You need this twice) so you are best seeking a local accountant if you would prefer this rather than allow me to offer an additional service. But Just Answer sadly does expect the additional service to be offered rather than work over and above the initial question to be given. If you would prefer a telephone call which does allow more freedom to extend the time and information needed - this may be a suitable alternative (but again I am afraid a further fee will arise) Thanks Sam
Customer: replied 1 year ago.
I'm afraid it is still not clear whether both private residence relief or private lettings relief can be applied or just one of the two.
When would the CG tax be due if the flat was sold in January 2015?
Caroline
Expert:  Sam replied 1 year ago.
Hi I have advised this - you have two different periods of it being your main residence , as it did not become your husbands home until 2013.Then each of you get an allocation of private lettings relief on each of your shares of the remaining gain (so in essence x 2 of this allowance) which I have also advised And as the flat was sold in Jan 2015 - then as already advised you need to let HMRC know in time to file self assessment returns by 31/01/2017 - and pay and tax due. (as relevant to the 2016 end tax year) Thanks Sam
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Customer: replied 1 year ago.
Why would the tax be due in January 2017 instead of January 2016? The sale took place in tax year 2014/2015 so I would expect to pay tax by January 2016
Expert:  Sam replied 1 year ago.
Hi Thanks for your response You are quite right - I do apologise - if you sold in 1014/2015 - then this would apply to the 2015 self assessment with taxes due by 31/01/2016 - Thanks Sam

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