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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15950
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We have a shop which we own. We bought it in 1980 for

Resolved Question:

Hello.
We have a shop which we own. We bought it in 1980 for £13000 and have traded continuously ever since as a partnership. If we now sell it for, say, £250000 what Capital Gains tax might we pay? We are both standard rate tax payers.
Thank you in anticipation.
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Let me take a look at this and I'll get back to you. It will take a while to draft my answer so please bear with me.
Customer: replied 1 year ago.
Are you US based? Forget to check but we are UK.
Expert:  TonyTax replied 1 year ago.
I'm in the UK as are all the UK tax experts.
Customer: replied 1 year ago.
Thank you.
Expert:  TonyTax replied 1 year ago.
Capital Gains Tax is assessed from 31 March 1982 values. Any gain accrued before that date is tax free. However, I will use the £13,000 cost figure in my calculations. You should take a look at HS275 which deals with entrepreneur's relief. Assuming you meet the conditions set out therein, you should each qualify for ER. If you do, you will pay Capital Gains Tax Tax at 10% as opposed to 18% or 28% or a combination of the two rates depending on your respective income levels. If the sale proceeds are split between goodwill and the premises, then the gain on the premises will qualify for ER with the proviso that the business did not pay rent for it to you (assuming you own it) after 5 April 2008. If it did, then the proportion of the gain post 5 April 2008 will not qualify for ER. See Example 4 in HS275. If part of the premises was your home, then the gain on that part will qualify for main residence relief exemption assuming it was your main home. If the shop had a flat above it which you own but was not occupied by you, then the gain on that part will not qualify for ER or main residence relief unless you did live in it at some point in which case, letting relief may also apply to that part of the gain. See HS283 for information on CGT and the main home. If you each have a gain of £118,500 (£250,000 - £13,000 / 2), the first £11,100 will be exempt from CGT for each of you. That leaves you each with a taxable gain of £107,400. If entrepreneurs' relief was due on the whole gain, you will each pay CGT at 10%, £10,740. If you think that not all of the gain will qualify for entrepreneur's relief, let me know and I will do some more calculations.
Customer: replied 1 year ago.
Thank you - just absorbing your very full answer and will come back to you.
Expert:  TonyTax replied 1 year ago.
OK.
Customer: replied 1 year ago.
Hello. I have had a quick look at HS275 and I think we would qualify for ER but with reservations - see below.
Difficult to know the difference in value between 1980 and 1982 without further research.
The premises is not occupied by us and there is no flat - no income from the property BUT we have been paid £20,000 rent between us since about 2010.
Obviously this is complicated but your guidance is much appreciated.
Expert:  TonyTax replied 1 year ago.
Can you tell me how the £250,000 is split between goodwill and the premises and any other assets. What is the £20,000?
Customer: replied 1 year ago.
At the moment we are thinking of selling the building without the business (ie. closing it) so no goodwill involved.
The £20,000 is 'rent' we have been paid since about 2010 on the advice of our accountant. A paper exercise that just reduces our drawings by £20,000. I hope that makes sense?
Expert:  TonyTax replied 1 year ago.
If you close the business down and sell the property, then you should qualify for ER on the gain. You have three years to sell a business asset after a business has ceased or been sold and still qualify for ER. The ER will be restricted to those tax years before 6 April 2008 and those tax years post 5 April 2008 where no rent was paid.
TonyTax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Thank you TonyTax. Very grateful for your help. We may need more later in the year!
Expert:  TonyTax replied 1 year ago.
Thanks for accepting my answer.