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Sam
Sam, Accountant
Category: Tax
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CGT computation Can you please assist me with CGT

Customer Question

CGT computation
Can you please assist me with CGT calculations?
Currently I reside since 2012 outside UK, however keep traveling to UK to look after my house.
Travel dates are as follow:
Dates Days
2012 - left UK around 01/08/2012 to live in other EU country
year 2012
04-14 September 11
08-12 October 5
04-20 December 16
year:2013
January 5
January - in transit 2
March 7
Aprail - in transit 1,5
May - in transit 1,5
06-14 july 9
August 5
09-18 September 9
09-16 December 8
December 26 - in transit 0,5
year:2014
09-10 January - in transit 1,5
19-23 January 5
26-03 Febuary 6
15.04-18.04 10
21.07-04.08 15
27.10-31.10 5
year: 2015
15.04-24.04 9
26.08-16.09 22
16.10-06.11 22
I lived in this property as resident from 07.01.2007 until 19.01.2007and it was my residence from then, property was left empty for some time and then was rented out.
Can you also clarify what is: details of how you have utilised any losses and Annual Exempt.What other details are required?
Submitted: 1 year ago.
Category: Tax
Expert:  Sam replied 1 year ago.
Hi
Can you add up the days and put them into tax years please
Also advise what dates it was empty for - and did you use it to stay in when you returned to the UK
What dates it was rented out and confirm all rental income was declared to HMRC
You make reference to losses - what losses?
What was the purchase price and sell price- was this is your sole name
What date was this property sold
Costs to buy and sell please (state agents and legal etc)
Costs of any capital improvements
How long do you plan to remin out of the UK
I can the provide a calciultion for you
Thanks
Sam
Customer: replied 1 year ago.
Property purchased 26.01.2007 lived in the house from purchased date for couple of weeks or longer, but from 20.01.2007 another property of mine was declared in CGT computation as my main residence. Other property was sold on 30.07.2012.
I have written to tax office that I have left UK on 07.08.2012, so from 30.07.2012 until 07.08.2012 house was my main residence.
I have registered as self employed on 11.12.2011 and stop trading on 31.03.2013
Ever since I was coming back to UK I was staying in my house. House was rented but I always had 1 little box-room in the house empty.Can you add up the days and put them into tax years please
05.04.2012-06.04.2013 – 47.5
05.04.2013-06.04.2014- 45,5
05.04.2014-06.04.2015- 30
05.04.2015-06.04.2016 - 63Also advise what dates it was empty for - and did you use it to stay in when you returned to the UK
- property was empty from 26.01.2007 (but in reality few weeks later) until 19.08.2008
Main residence:
What dates it was rented out and confirm all rental income was declared to HMRC
I was than rented from 20.08.2008 and is still rented. All income was declared to HMRC.You make reference to losses - what losses?
This is required by HMRC for computation:
„Your computation should include details of how you have utilised any losses and Annual Exempt Allowance due.”What was the purchase price and sell price- was this is your sole name
Property in my sole name.
Purchased price 340000.00 with 10% deposit
Sale price 790000.00
What date was this property sold: 30.03.2016Costs to buy and sell please (state agents and legal etc)
Legal: 1000GBP plus 2000GBP
Agency 16590.00
Stamp Duty at 2007 rateCosts of any capital improvements
House refurbishment and extensions 100000.00K
Home improvements and maintenance – 15000.00How long do you plan to remain out of the UK
My plans have changed now and I am planning to return to UK most likely in May 2021. What happens if I return before that date?In HM revenue and custom form – UK child benefit enquiry after my wife move ot of UK in 2011 I have stated that I intend to return to UK on 01.01.2017. Also in the box: under which law I was liable to pay NI contributions – I have answered that until 31.03.2013 the UK law (this was due to self employment in UK. I have stopped trading on 31.03.2013. I have become self employed since 05.03.2014 and this still continues. I work at least 50 hours a week.
Tenancy:
8 Bedrooms and 6 always rented out.Regards
Expert:  Sam replied 1 year ago.
Hi Thanks for your response If you only lived in this house for a couple of weeks and had another property that you declared as your main residence, then this property will not be treated as your main residence from the date of purchase as clearly all your personal possessions and all aspects of you life were really at the sold property until 30/07/2012Then you advise it was your main residence for 8 days until Aug 2012 - which I am not sure HMRC will accept this as you then left the UK to work abroad so had no chance to establish a life there in the fashion HMRC would need to see. Sp I will allow thisThen we have a total of 185 days for visits - so we have a total of 193 days plus the last 18 months ( 548 days) this is a total of 741 days out of a possible 3285 days So the gain is the sale price £790.000 less purchase price £340,000 provides an initial gain of £450,000You then state you had capital improvements of £10,000 (the Home improvements and maintenance are set off against rental income not the capital gains) which gives us a new gain figure of £440,000Then we have costs to buy and sell - a total of £16590 - plus stamp duty - (you will need to check what this figure was but I have estimated this as £10000) so a total of £26590This leaves a new gain of £413,410 to considerSo what losses do you have ? You still have not advised what capital gain losses you have ? Next we consider tax reliefs Private residence relief is 741/3285 x £413,410 = £93,253 This leaves a gain of £320.157 and then private lettings relief of £40,000 this leaves a gain of 280,157 liable to capital gains tax. Now usually if an individual remained not resident for at least 5 tax years during which time their property was sold then a capital gain would have been exempt in the Uk with just the gain arising for declaration and taxation on the country of residence, but if you come back 2017 - then it does not look like you will achieve those full 5 years so then the calculation above would apply to you. But if you remain out of the UK until 2021 you still will have a partial capital gain, as the laws have changed recently (from 05/04/2015) ,I have added a link here for you for information that details all the changes https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property The gist is any sales after 05/04/2015 where its residential property in the UK and the owner is not UK resident then you must report the sale to HMRC no later then 30 days after disposal - Link here for you to do this https://online.hmrc.gov.uk/shortforms/form/NRCGT_Return?dept-name=&sub-dept-name=&location=43&origin=http://www.hmrc.gov.ukAnd then the gain itself is reported on your self assessment at the year end (so if you sell before 05/04/2016 on the 2015/2106 self assessment) HMRC will charge you on any gain made from 05/04/2015 to the date of sale, so I would encourage you to get an estate agent to value the property retrospectively - in case you do decode to remain out of the UK until 2021 so that a true gain value can be achieved. Then the gain will be the sale price less the 2015 value to form the initial gain - disposal costs and the annual exemption allowance with the rates of 18% and 28% (at this time) still in use. The finer details remain to be seen as we have not yet arrived at the first year end with this new legislation so thats all I can advise at this time - the finer details will be mae available by HMRC after 05/04/2016 Let me know if I can assist with the capital gain position further You then offer information regarding self employment and a return to the UK in 2021 and child benefit and National Insurance - this is not part of the original question for which I have offered to answer, so when we have completed the capital gain position for you then I can offer an additional service for your other questions (which will incur an additional charge) or you can list them as a new question (whichever you prefer) Or it may have been you were just offering this up as additional information. Thanks Sam
Customer: replied 1 year ago.
Sam
I have made mistake. The property capital improvements were 100 000.00 not 10 000.
For which year estate agent should value my property?
In terms of losses I am not sure about what type of losses HMRC talks about in their guidance.
In terms of info provided on child benefit form - I was only ofering them as additional information, nevertheless I intend to ask you new question regarding emigration rule to make sure I am regarded as emigrant and also another one.
Expert:  Sam replied 1 year ago.
Hi £100,00? How is that possible - could you list them please and confirm you have receiptsThanks Sam
Sam and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
100 000.00
Original house was a small 3 bedroom property with one bathroom. I have build the side extension, I have converted the whole loft, turned garage into bedroom and renovated rest of the house. I have also landscaped garden and done drive.
So:
garden - 20K
Loft - 20K
drive-3K
side extension- 15K
structural work inside- 5K
rear extension - 8K
bathrooms x2 - 10K
refurbishment - plastering, rewiring, central heating, painting, carpets - 19
I have used additional mortgage lending to finance this project.
I have some invoices, but not all.
Now house have 7 bedrooms, 2 bathrooms plus WC, plus additional living room.
Can you also clarify the following:
For which year estate agent should value my property?
In terms of losses I am not sure about what type of losses HMRC talks about in their guidance.
In terms of info provided on child benefit form - I was only ofering them as additional information, nevertheless I intend to ask you new question regarding emigration rule to make sure I am regarded as emigrant and also another one.
Customer: replied 1 year ago.
Can you please clarify below:
Then you advise it was your main residence for 8 days until Aug 2012 - which I am not sure HMRC will accept this as you then left the UK to work abroad so had no chance to establish a life there in the fashion HMRC would need to see. Sp I will allow this
What do you mean: Sp I will allow this? Do you mean so I will allow this? If HMRC might say that it was too short to establish life there than perhaps we should not allow that???
Customer: replied 1 year ago.
Can you also clarify how did you established those days below?????
Then we have a total of 185 days for visits - so we have a total of 193 days plus the last 18 months ( 548 days) this is a total of 741 days out of a possible 3285 days
Customer: replied 1 year ago.
Can you clarify the following: Now usually if an individual remained not resident for at least 5 tax years during which time their property was sold then a capital gain would have been exempt in the Uk with just the gain arising for declaration and taxation on the country of residence -
I do not understand the following: with just the gain arising for declaration and taxation on the country of residence
Customer: replied 1 year ago.
Do you mean that if I stay outside UK for 5 years than I need to pay only CGT tax in UK from 05.04.2015 and rest of the tax on capital gain need to be paid in the country of residence?
Expert:  Sam replied 1 year ago.
Hi You did all of this work yet had no intention of making this your main residence? It sounds this was always a exercise to make a profit through property development - can you advise if this was the case and also advise me what your self employment trade is ? The year you need to get the estate agent to value is the value at 05/04/2015 HMRC refer to losses if you have already sold an asset and made a loss - so you can ignore this Thanks Sam
Customer: replied 1 year ago.
SamI have done all the work and intend to live in that house as at that time I was employed in London.I stayed with the family in that house for few months. However when sold the other property I have written in computation that the other house (sold in 2012) was my main residence from 20.01.2007 - I am not sure why I have done this - probably by mistake as this would not had any impact on CGT tax for house which I have sold in 2012. On 17.09.2007 I have written to HMRC by recorded delivery to say that from 17.09.2007 I would like to nominate the other house (one sold in 2012) as main residence.In this circumstances - do I need to change this detail on computation for house sold in 2012 to change date for sole residence from 17.09.2007 from 20.01.2007??? Should I ask you new question in regards ***** ***** matter?
Please find below my original statment from 2012 computation:"The property was purchased 20/01/2007 and sold 30/07/2012 so owned for 66 months.
It was my sole residence with no paying tenants (so 100% private residence relief is due) for the period 20/01/2007 to August 2009 - which totals 31 months so 31/66 x £113,479 - £53,301 Private Residential Relief"Unfortunately when credit crunch started in 2007 I moved to other house we had and rented this one out.Employment history:
Currently I offer project management and building services.
I was employed within 2008-2011 and worked as project manager on construction site.
In my self employment in 2012-2013 I offered small business to bushiness services.
Prior to 2008 I was self employed as builder for several years.
I have formal qualification in both: construction management and business management.Regards
Expert:  Sam replied 1 year ago.
Hi
Thanks for the furtehr information
First you advise you stayed in this property a couple of weeks now you advise a couple of months?
And now you are asking about the precious house sold - yes this must be a new question but you also have to click accept or rate so I am credited for the time I have spent assisting.
Can I also suggest after accepting all three just use this one thrashed to finish off the outstanding matters and then a new question re the house already sold
Thanks
Sam
Customer: replied 1 year ago.
Sam
I have now accepted all 3 questions.In regards ***** ***** In the period from January 2007 untill September 2007 we established our live in house in question, nevertheless from time to time we had to move to the house sold in 2012 because of the building work. I do not remember exactly how many weeks we stayed in the house sold in 2012, however most of our time we have spent in the house in question. We celebrated birthday there, visited neighbours, ordered goods, travelled to work, our daughter went to local nursery etc. As you have correctly my advise of 2 weeks was incorrect. This was due to the fact that I have advised on computation for house sold in 2012 incorrectly and I did not remembered exactly which weeks we stayed in the house sold in 2012. At that time I was convinced that this would not have any impact on CGT for house sold in 2012. As this is important now I would like to get facts in order so they reflect (as close as possible) our movements between the houses.As this conversation is dragging on I would like to pay another tip but I do not know how to do this. Can I rate you again?Regards
Expert:  Sam replied 1 year ago.
Hi
Let me read all three questions - and lets just continue on one - so give me a little time to gather facts from all three and then I will reply within the hour with a full answer OR additional questions.
My suggestion for the phone call is because I cannot undertake the statutory tests for you without establishing an answer to one question to see where this leads with the next and there just isn't the time, capacity or ability to cover them all through a Q & a thread due to the complexity, but I will try if that makes it easier for you. As you would like to pay extra - I shall also - when I send a full reply offer the additional service which you then just accept then we can see this through to the end so you are happy with what you need to do - does that sound fair?
And of course if I need to ask more question to enable us to get to that point I shalla sk them through just one question listing.
Its ok for you to respond to this answer so we can see how we will proceed
Thanks
Sam
Customer: replied 1 year ago.
Sam
Yes that fine. So in summary we will have two enquiries:
- this computation and related issues for house no.1 (unsold yet)
-and amendment query for computation for house no.2 sold in 2012?Thanks for your patience.
Kind Regards
Customer: replied 1 year ago.
Sam
Can you also clarify how the following apply to myself?
Double taxation agreements don’t apply to tax on gains from selling UK residential property.
Regards
Expert:  Sam replied 1 year ago.
Hi
They do apply - as long as we have a double taxation agreement in place with the country in which you now live and work and are classed as resident, and capital gains are covered within the treaty
Thanks
Sam
Customer: replied 1 year ago.
Sm Q:
You cannot swap and change which house was the main residence after house number 2 has been sold back in 2012 and clearly was your main residence throughout - so what you refer to as house number 1 cannot also be your main residence - so the period 27/01/2007 to 30/07/2007 cannot be treated as your main residence towards this sale to take place as you cannot have two residences as your main residences under the circumstances you describe. So that clears that up I hope, but you do need to change the dates you advised HMRC re property 2 as you seem to have then advised HMRC that it did not become your main residence until 17/09/2007 - so why did you do that when clearly it was not the case ??
Reply:
House no.1 – purchased on 27.01.2007 and not sold yet.
After I have purchased house no.1 I have carried some work to it. Firstly it was heavy demolition and structural work, so initially we stayed in house no.2. After lets say 4 months (?not sure exactly what date was it) we have moved into house no.1 and established life there: nursery, doctor etc. Than due to change in work load and credit crunch we decided that we need extra income and would be good to rent one of the houses. We recognised that it would be much easier to rent out house which we have already refurbished because of its standard and location. Then we decided to move to house no.2 but I do not remember exactly whether it was end of August or beginning of September, nevertheless we could assume that it was on or about 17.09.2007 as stated in letter to HMRC.Sam Q:Then you advise you family did not join you abroad until Sept 2011 so where did they live House 2 or 1?
From lets say: January 2007-Aprill 2007 we all together lived in house no.2
From lets say Aprill 2007 untill on or abour 17.09.2009 we all togerher lived in house no.1
From on or abour 17.09.2009 untill around September 2011 we all lived in house no.2
From around September 2011 untill 30.07.2012 I lived in house no.2 on my own and my family lived abroad
From 30.07.2012 I kept travelling in and out of UK, but most of the time lived abroad with my family.Reply:
Then you seem not to have actually move out of the Uk during the years 2007 to 2011 as your family were still in the UK and you were till trading as self employment until 2012/2013
Between 2007 and 2012 I was living pernamently in UK with family going out only for holidays.
My employment history in UK:
Self employment 2007-2008
Employment 2008-2011
Self employment 2001-2013
My employment abroad:
Self employment 2014-until nowI am afraid this is becoming too big a situation to unravel and establish fully - and may I add you have made this into a more complex situation by having one sent of facts and then changing them and having HMRC implement these incorrect facts to the sale in 2012 which is making it impossible to see you charged fully on capital gains on this sale to come.
Reply:
Can I ask you a new question to run calculation of CGT for house no.2 with ammended period of main residency in initial period of ownership to see what would be the diffrence in CGT chargable?
Sam Q:Then your residency status for 2007 to 2011 (Sept) is now not as solid as it first appeared - HMRC do not seem to be aware you are even out of the country as you failed to tell them - and did not operate tax deductions from the rents which you were legally obliged to do as you had not registered for the non residency landlord scheme - so this is another complication that needs unpicking.
Reply:
This is incorrect.
I was living pernamently in UK between 2007- 30.07.2012. (From this date I kept going abroad and actually spend there more time than in UK. Initially I went I went back to UK several Times between August and December 2012. Every time I have come back to UK I stayed in house no.1.
I have also reported all rental incomes to HMRC in self assesments and never used any relief from non residency landlord scheme – I was living in UK so I reported rental incom through self assesment and keep doing it untill now!!!!!
Customer: replied 1 year ago.
Sam Q:
Then we have the fact that the capital gain laws changed with effect from 05/04/2015 - so whether we can argue you remin not resident for at least 5 tax years, during which this new sale takes place - you will still have a capital gain position due to those changes in the law (be it though a lesser one as its just any gain made from 05/04/2015 to the date of sale)
My reply:
I understand that I have to pay CGT from 04.2015 in UK and thats absolutelly fine, however what I am trying to establish is whether rest of the tax need to be paid abroad.
My dificulty is that From 30.07.2012 I keep travelling to and out of UK. Majority of time I sped abroad with family. In total my days in UK are far below 90days together, however I was registered as self employed in UK from end of 2011 untill 30.03.2013 and registered as self employed abroad from 05.03.2014 until know. I would like to draw a line from which date I become non resident for tax purposes to understand my position.Sam Q:
I really do think you need to engage an accountant as this is too complex to keep going back and forth as it gets more complex each time I ask a new set of questions, so
1) We either have this telephone conversation so I can actually get all the facts in one go - so I can then also advsie you over the telephone but will be happy to also write this up for you by way of a resposne OR
2) You need to find an accountant that you can sit in front off s a natural flowing conversation can take place (which would be far superior to a telephone call and backed up by all your receipts and documents and flight evidence of in and out of the country, plus look at your self employment and the rental position to rectify this - so each element can be time lined and papertrailed accordingly.Reply:I do not think that telephone conversation is going to be helpfull. I keep forgeting dates Times and sequence of events. You are already most likely think I make up a lot of those days to suit me.
But apparently the only mistake I have done was to state in contrary to my letter to HMRC that my residency started from 20.01.2007 in house no.2 while from aprill 2007 untill september 2007 I have established my live in house no.1Can I propose we do the following thing:
1. Based on information provided you run a safe line (date or time period) between me still being UK tax resident and than non UK tax resident.
2. You carry computation (simulation) for house no.1 – fres question with newly presented dates
3. You carry new computation for house no.2 with asmmended initial period of sole residency.
If this is OK I suggest I ask you 2 fresh questions for both computation and we also keep opened this one to answer above query 1?
We can also close all other questions?
ThanksSam
Expert:  Sam replied 1 year ago.
Hi Thanks for your responsesI am sorry but you did not establish a life long enough at house 1 for HMRC to accept this initial time as private residence relief and its only now you are stating that it did not become you main residence until Sept 2007 but you let HMRC to believe house 2 at the time that it had been your main residence from purchase to sale. So you will owe capital gains tax on house 2 now you have implemented this with HMRC - but I doubt they will accept House 1 as your private residence relief as you advsie it was inhabitable and you only lived there for maybe 4 months? Before moving back to No 2- it doesn't sit right to upheaval all your life just for 4 months - and I do not feel HMRC will accept this if they look at the situation closer. Re abroad you state that you went abroad first and then your family joined you now you state your family went abroad and you joined them??? Please clarify and when did you actually leave the UK to live and work abroad?You then stated you went abroad 2011 now you advsie its 2012 ???? Why did you tell me it was 2011??And you also advsie your self employment continues after you had left the Uk to live and work abroad - so I need more information I cannot run the calculations without knowing the full history and each time we approach a new set of respiosnes form you the dates and situation has changed again. You advised me that you were treated as not resident - from 2011 - yet you did not tell HMRC that - so another diffeence in the information you give me But I can advsie YES the rest of the capital gain tax on House 1 will need to be paid abroad. And any tax suffered for the gain that relates to the period 05/04/2015 to date of sale can be used to offset the gain abroad - IF we have a double taxation agreement with that country that cover the capital gains tax regime. I cannot help you establish the date you could have been treated as not resident as the information keeps changing which I find a little strange and its hard enough to keep typing responses without the data and the calculations then also needing to change as I have to keep scrolling up and opening up the other questions threads to establish the differenet facts you have provided. You need to consult and accountant so this can be verified face to face with facts and appropriate evidence. - which I am sure you can appreciate. Thanks Sam

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