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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15915
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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1] Am I right in thinking that on selling a rented property

Customer Question

1] Am I right in thinking that on selling a rented property in which we lived for 9 out of 34 years I can reduce the capital gain by 10.5/34 [the 9 years plus the last 18 months] and in addition claim a lettings relief of £40,000?
2] We acquired it before 1982. What documentation is needed to establish its value as of that date?
3] In 1985 the leaseholders collectively bought the freehold and granted ourselves extended leases. Can I claim the legal costs of this?
4] In 1991, before renting out the property we had it redecorated and refitted. Can we claim the costs of this? Including carpets?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. 1 You can claim a deduction for 10.5 years. That will be your main residence relief. The letting relief will be a maximum of £40,000 per part owner but it could be less. It depends on the facts and figures, ie how much the gain is and how long the property was let in relation to the total period of ownership. See Example 9 in HS283 here. That will illustrate how the letting relief is calculated. Letting relief is the lesser of £40,000, the exempt gain and the gain for that part of the letting period not covered by the last 18 months of ownership. 2 You will find it difficiult to get a documented value unless you can find an estate agent with very old records. HMRC may use The District Valuer to put a value on it based on their record of property sales in the area at the time but you can dispute that if you disagree with it. You may have to use an intelligent guess. 3 Yes. Enfranchisment is effectively an improvement. 4 The costs of general repairs that would normally be claimed against rental income cannot be claimed. Costs that improved the property in terms of value can be claimed. I would not claim the cost of carpets. I hope this helps but let me know if you have any further questions.
Customer: replied 1 year ago.
Thanks. The works of the flat were all for the purpose of making it lettable and I was informed that I could not therefore claim any of them against tax. But I assume that the costs of e.g. beds and bedding, furniture etc are not allowable. I am thinking of complete redecoration and refurbishment, renewal of boiler, replacement of asbestos in boiler cupboard, repair of central heating etc, none of which I claimed against rental income.My first wife and I bought the flat in 1980. I have no record of the initial price, or of the sum at which it was valued when we separated in 1983. But my records show that the mortgage I took out then to buy out her half share was for £38,000. On that basis might £70,000 be the sort of estimate HMRC might accept? [I appreciate you're not a valuer!]
Customer: replied 1 year ago.
i.e. I was informed I could not claim the costs of refurbishment against the rental income
Expert:  TonyTax replied 1 year ago.
As you had to spend money to make the flat habitable, you can claim those costs against your gain. I'd be surpised if there was much increase in the value of a property between 1980 and 1982. Your logic on the value makes sense given that you had to pay £38,000 to buy your wife out.
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Customer: replied 1 year ago.
What arrangements are there for me to postpone payment of capital gains tax on the sale of the flat? Are there still government-approved 'green' investments that attract favourable treatment?
Expert:  TonyTax replied 1 year ago.
I'm not aware of green investments that can defer CGT. Investments in Enterprise Investment Schemes and Seed Enterprise Investment Schemes can be used to defer in the case of EIS and write off 50% of a gain in the case of SEIS. Take a look here and here for more information.

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