How JustAnswer Works:
  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.
Ask bigduckontax Your Own Question
bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 3815
Experience:  FCCA FCMA CGMA ACIS
75394688
Type Your Tax Question Here...
bigduckontax is online now

Question forCustomerHello, following on from a

Resolved Question:

Question forCustomerHello, following on from a question I asked yesterday about the capital gains tax arising from the sale of a flat: Can you please give me a detailed calculation of the capital gains, but taking now into account the LR - all facts are written in my previous email, with the following addition/modification:
The first period we stayed in the flat, was on Easter 2002 (not 2003 as I wrote by mistake). Specifically it was from 22/03/2002 to 26/03/2002.
And then the second period was just before the sale, as mentioned in the question: we moved all our "lives" into the flat, including personal effects, addresses, etc
Thank you very much
Submitted: 1 year ago.
Category: Tax
Expert:  bigduckontax replied 1 year ago.
Thank you for asking for me. You will have to rerun the figures please. LR may be available up to 40K depending on the net rentals received. Your occupation times are desperatly short, HMRC may well refuse LR, but claim it anyway; that Department can only say no after all.
Customer: replied 1 year ago.
Hello,
Further to our previous conversation, I would like to ask if you could please calculate the capital gains tax for us, based on the following facts:
1. A flat was bought in July 2000, in auction, for £63,000 (jointly with my wife).
2. The flat was sold on 20/4/2016for £207,000.
3. The selling expenses are £2,864.
4. The purchase expenses are £1,509.
5. There are about £20,000 renovation capital expenses (approximately)
6. From 22/03/2002 to 26/03/2002 , my wife and I moved into the flat and used it as our own residence.
7. On 02/03/2016, my wife and I also moved into the flat and used it as our own residence until the day of the sale.
8. The flat was let apart from the two periods mentioned above.
9. For 2015-2016 tax year, our income was almost £0 (we had rental income from the flat and from another property, but we also carry forward losses from previous tax years) and there have been no other transactions that could give rise to capital gains tax (no losses, no other gains)If you could please give us a detailed calculation taking the LR into account and any residence relief, it would be great.
Many thanks
Expert:  bigduckontax replied 1 year ago.
Thank you for asking for me. here is the data you requested. Assuming that you have a net rental income of 2K which you told me and you do not get LR then your gain is 207K - 2.864K - 63K - 1.509K - 20K = 119.627K at half each is say 59.81K. Knock off your Annual Exempt Amount of 11.1K leaves 48.713K of gain. As you have some 2K income will be, 46.711K gain taxable. 43K @ 18% [7.74K] and 4.6K @ 28% [1.31K]; total CGT payable 9.03K say a tad over 9K each. Better than a poke in the eye with the proverbial sharp stick. I do hope that you find my reply of assistance.
Customer: replied 1 year ago.
Thank you very much Keith,
Can you also please do the calculation with the assumption that we get LR? As we discussed, it might be better to claim the LR when we submit our return and then wait for HMRC's decision.
Many thanks
Expert:  bigduckontax replied 1 year ago.
You have told me that your net rental is 2K so the 28% CGT slab will reduce to 0.75K. Please be so kind as to rate me before you leave the just Answer site.
Customer: replied 1 year ago.
Thank you Keith,
I am a bit confused now: I thought that the Letting relief is claimed when private residence relief is claimed as well. And I also thought that the rental received is not related to the LR. My understanding from reading the HMRC guidelines, is that, if PPR can be claimed, the LR (up to £40k) can also be claimed. I can not find in the guidelines any mention about taking the actual rent received into account.
Can you please clarify these points for me?
I noticed in your answer, the PPR is not mentioned.
Many many thanks - you have been extremely helpful so far
Expert:  bigduckontax replied 1 year ago.
So am I, because the reply I gave you was incorrect, deep apologies! LR will be the aggregate of net rentals over the letting period or 40K whichever is the less. Take this off your gain to reveal the actual amount exposed to taxation.
Customer: replied 1 year ago.
Many thanks Keith
No need to apologies - as I say, you have been extremely helpful.
I understand your last answer, but I am still uncertain as to why you think that the LR is based on rentals and not on the PPR? I think the HMRC guidelines state that LR is the lower of PPR or £40k, so, dont'you think, we should calculate the PPR first and then the LR? Or have I got it completely wrong?Many thanks
Expert:  bigduckontax replied 1 year ago.
My view is that you have no PRR at all as your occupation time is so small.
Customer: replied 1 year ago.
Ok many thanks. But are we then entitled to Letting Relief? I thought that LR is claimed only if PPR is claimed. If no PPR is claimed, the LR can not be claimed. This is I think the most important question, because I may have it got completely wrong.
Many thanks
Expert:  bigduckontax replied 1 year ago.
The HMRC advice is very opaque. Most experts on this site have advised LR relief available provided you occupy either before or after the letting period.
bigduckontax and other Tax Specialists are ready to help you
Customer: replied 1 year ago.
Ok - great - many thanks
Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

Related Tax Questions