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bigduckontax
bigduckontax, Accountant
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Question relating to tax: 1. In 2000 I bought a flat

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Hello,Question relating to tax:
1. In 2000 I bought a flat - jointly with my wife.
2. In Easter 2003, we moved into the flat for about 6 or 7 weeks, while refurbishing another property that was sold in Summer 2003. Unfortunately we did not keep any records to demonstrate the move into the flat. My wife and I simply moved all our personal belongings into the flat and we lived there continuously for 6 to 7 weeks, but we did not move any of the correspondence addresses, nor did we inform the HMRC.
3. The flat was let from 2000 until 2015, with the following exemptions:
3a. The 6 to 7 weeks we moved into the flat in 2003
3b. The period from 2/3/2015 until 20/4/2015: during this period my wife and I moved into the flat, including moving all our belongings and stayed in the flat and also moved all the correspondence addresses to the flat.
4. The flat was sold on 20/4/2015.
5. After the sale of the flat we moved into rented accommodation.
6. Throughout the period of ownership of the flat, we owned another house, call it Main House, that was let. This Main House was nominated as our Main and principal residence in November 2007 (letter send to HMRC and acknowledged).
7. In June 2011 we moved into the Main House and kept 2-3 of the rooms and shared the rest with tenants.
8. As mentioned in 3b, we moved into the flat from the Main House on 2/3/2015, because our circumstances had changed and we wanted to live in an independent flat, rather than sharing the house.
9. From 20/04/2015 until November 2015, we lived in a rented flat. In November 2015, we then moved back into the Main House and have been sharing the house with 2-3 tenants.Could you please let me know if:
We can claim any PPR relief for the sale of the flat for capital gains tax, based on the above facts?Many thanks
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. I am of the opinion that the only PRR to which you will be entitled will be for the last 18 months of ownership when you are deemed to be in residence even if this is not the case. Work out the total ownership in months say 144 months. Thus of your gain 18 / 144 will be entitled to PRR leaving 87.5% exposed to the tax. This is levied at 18% or 28% or a combination of the two rates depending on the individuals' income including the gain in the tax year of sale. The gain is taxed half each and both of you are entitled to an Annual Exempt Amount (AEA) of 11.1K plus Lettings Relief (LR) up to 40K depending on the rentals received. The gain is the difference between the acquisition and net sale price ie less costs of sale including advertising. The acquisition price is the purchase costs plus costs of purchase including Stamp Duty Land Tax plus any improvements eg installation of double glazing, central heating, extensions but not routine maintenance which is allowed against rental income. I do hope that you find my reply of assistance.
Customer: replied 1 year ago.
Hello Keith,Thank you very much for your advice - much appreciated!.Just a question:
I am not sure I understand what you mean "or the last 18 months of ownership when you are deemed to be in residence even if this is not the case". I am aware of the 18 months rule. But I am not sure I understand what you mean, by saying..."even if this is not the case". Based on the facts that I mentioned in my first question, I would argue that we were in residence for the (short) period. Thus, then we are entitled to the relief for the last 18 months?
With regards ***** ***** letting relief: the rentals we have received from the flat are well above this figure. Does this mean that we are entitled to the 40k relief and we should deduct this from the capital gains?Many thanksPS: I have subscribed to the service the site offers about unlimited questions - but please let me know if I should ask the above questions as a new question, rather than continuing this thread of discussion.
Expert:  bigduckontax replied 1 year ago.
As far as LR is concerned probably you have 40K deductible plus your AEA, each. The period of occupation was so short that the 18 month rule will apply. Even HMRC realise that disposing of a residence cannot be so quickly achieved as the sale of a second hand car. The period used to be three years, but was reduced some time ago. I am of the opinion that these are proper follow up questions. Please be so kind as to rate me before you leave the Just Answer site. .
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Customer: replied 1 year ago.
Dear *****,Many thanks. I am a bit confused now.
In the first reply I thought you mentioned that the 18 months rule will apply and in your second reply you mention that it will not. Maybe you could please clarify this for me?And the most important question: Based on the facts, with this short period of occupation, are we entitled to the 40k letting relief? Even if we are not entitled to the 18 months PPR relief, are we entitled to the lettings relief?Again please feel free to let me know if you think these are not proper follow up questions and I will submit them as new ones.Many many thanks
Expert:  bigduckontax replied 1 year ago.
NioI didn't, I actually said it would apply, indeed it always applies! My actual word were: 'The period of occupation was so short that the 18 month rule will apply. Even HMRC realise that disposing of a residence cannot be so quickly achieved as the sale of a second hand car. The period used to be three years, but was reduced some time ago.' You are entitled to LR if you occupy the property before or after the letting period or both. If you don't then you do not get this relief.
Expert:  bigduckontax replied 1 year ago.
Thank you for your excellent support.
Customer: replied 1 year ago.
Dear *****,Many thanks. Apologies for being pedantic, but can you please let me know if my understand is correct:
Since we lived in the flat in 2015, before the sale, for 1 month (yes, I know short period), then we are entitled to lettings relief, i.e. for each of us, there is £40k that is deducted from the capital gains.Many thanks
Expert:  bigduckontax replied 1 year ago.
You do not get LR unless you have lived in the accommodation either before or after (or both) the letting period. You are correct, each of you would be entitled to AEA and LR.
Customer: replied 1 year ago.
Thank you Keith,And the LR is £40k for each of us?Many thanks
Expert:  bigduckontax replied 1 year ago.
Indeed!

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