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bigduckontax
bigduckontax, Accountant
Category: Tax
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Within the last tax year I sold a house and am not clear

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Hi
Within the last tax year I sold a house and am not clear whether or not I need to pay capital gains tax on the proceeds, and if so how to legally minimize the amount I should declare. The facts are as follows.
The house was bought in 1993 for £39,500 by my wife and myself jointly. We lived there until 2000. It was our sole residence. From 2000 - 2012 we lived in houses we did not own: I am a clergyman and for the period 2000 - 2007 the house I lived in came rent free with the job. From 2000 - 2012 we lived in another house on which we paid rent (I was now a chaplain employed by the NHS.) In 2012 we were able, thanks to a legacy, to buy outright a property which is now our permanent home, using a legacy.
The other house was, from 2000 onwards, variously unoccupied, served as a holiday let, and then let to a succession of tenants. All income and expenditure on the property throughout this period was noted on my tax returns. In 2015 we sold it for £104,000 - having made substantial improvements to it during the time time lived there, i.e. prior to 2000. Only during the period 2012 to the present day have we actually owned two properties.
Presumably my wife and I could each declare half the profits on the house separately, thereby qualifying for the £11,000 allowance on capital gains tax twice over. I am not clear if we then have to pay capital gains tax on the total balance between the price paid for the house in 1993 and the selling price in 2015, or whether our slightly unusual living circumstances since 2000 qualify us for any further exemptions. I.e., from 2000 - 2012 we were living in houses we did not own, while not able to occupy the one we DID own, which as I have explained served other purposes during that time. Please advise.
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. This house was a Joint Tenancy so any gain you made was 50/50 if subject to CGT. For the period you lived in Job related accommodation Private Residence Relief (PRR), which relieves Capital Gains Tax (CGT) at 100%, is extended. There are some dates or discrepancies in your records. You say you lived in job related accommodation 2000 - 07 yet from 2000 - 12 you lived in another house upon which you paid rent., This doesn't quite add up so could you please verify. Without clarity on this matter I cannot fully address your question.
Customer: replied 1 year ago.
Typo! Should have put "from 2007 - 2012 I lived in another house" etc. Hope that clarifies.
Expert:  bigduckontax replied 1 year ago.
Was that house job related accommodation?
Customer: replied 1 year ago.
No, it was a normal private letting. From. 2007 we were renting, not able to live in our own house because it was in the wrong place! In 2012 we moved into our present address, selling the other house last year. Weird, I know.
Expert:  bigduckontax replied 1 year ago.
The queries are not over yet! You say you made substantial improvements to the house. These enhancements like installation of double glazing, central heating, extensions, loft conversions, but not routine maintenance, are all allowable against a possible CGT liability. Can you enumerate these, please. Maintenance undertaken during the letting periods can be offset against rentals received.
Customer: replied 1 year ago.
Unfortunately the big improvements were made around 1995-6, when we lived in the house. We have offset other things against tax already, from 2000 onwards. We might struggle to find any records of the major improvement work from.last century but have been told this would not be relevant anyway?
Expert:  bigduckontax replied 1 year ago.
Then they are allowable against the gain for CGT so are highly relevant. Your gain is 104K - 39.5K = 64.5K; divide by 2, half each, 32.25K. PRR applies for the periods when you lived in the house plus when you lived in Job Related Accommodation. That gives 14 years occupation time plus the last 18 months when you are deemed to be in residence even if this is not the case; 15.5. Total ownership time was 22 years. Thus 22 - 15.5 / 22 = say 29.5% of any gain is exposed to CGT. This drops the gain to 9.5K each. Knock off the non cumulative Annual Exempt Amount (AEA), 11.1K, leaves nothing taxable. Simple, as the Merkat in the TV advert would say! Confused, you will be! I do hope that I have been able to set you mind at rest on this matter. Actually the time calculation is done in months and not years, but that will not make much difference and we have not even mentioned Lettings Relief (LR) which is available up to 40K which at the moment you do not need. Benjamin Franklin, who said that in life there were but two certainties, death and taxes, has been confounded again. I may say it doesn't seem to happen very often!
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Expert:  bigduckontax replied 1 year ago.
Thank you for your support.

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