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Sam
Sam, Accountant
Category: Tax
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How do I calculate Capital Gains Tax on the sale of a

Resolved Question:

How do I calculate Capital Gains Tax on the sale of a Commercial Shop with a Domestic Flat above it...at the time of sale the flat was my main home! The property was sold as one transaction!
Submitted: 7 months ago.
Category: Tax
Expert:  Sam replied 7 months ago.

Hi

Thanks for your question

Can I ask was this a limited company in which the commercial aspect of the property was sued - or a sole trader (or did you just collect rents and let out the retail element to another trader)

What was the split value between the flat and retail part or purcahse and sale and had the flat been your main home throughout ownership?

Thanks

Sam

Customer: replied 7 months ago.
I am a sole trader....I bought the retail shop and flat as one building and sold it as one building, so I cannot give a split value on each. I run a business from the Retail Shop but used the flat for storage until I moved in approx one year before the sale. Neither were ever rented out.
Regards
Wayne
Expert:  Sam replied 7 months ago.

Hi Wayne

You need to establish a split if you wish to take advantage of entrepreneurs relief - which will allow some of the gain to be liable at 10%

Or it will be the sale price less the purchase price - this forms the initial gain from which you can deduct the costs to sell (estate agent and legal fees) and the costs to purchase. You can also deduct any capital improvements (such as new kitchen bathroom etc)

Then whats left over forms the gain - as you do not have split prices you will have to split this figure as per sq footage to represent the flat and the retail part.

The flat also will form part of the retail element up until th date you moved in - so this then needs to be split furtehr so your personal part can be considered, and 1 year /total period of ownership will be considered for tax releif - private residence relief.

When this is deducted the the exemption is applied (£11000 for 2015/2016 £11,100 for 2016/2017) ) and the reminder is liable to capital gains tax.

the rate is based on your annual income for the year of sale

If you are a high rate taxpayer then all the gain will be at 28% and if you have a basic rate tax position then any unsed basic rate band can allow the equivalent gain to be charged at 20% and then any remianing gain at 28%.

Let me know if I can assist further

Thanks

Ssam

Customer: replied 7 months ago.
Hi Sam
Thanks got most of this....just need to understand the private residence relief. Can I claim £11000 for the one year I was living there or £11000 x the percentage of floor space that the flat entails.
Regards
Wayne
Expert:  Sam replied 7 months ago.

Hi Wayne thanks for your further question

The £11,100 is the annual exemption allowance (so you would get this regardless of whether you had lived there or not)

The private residence relief is based on the gain x sq footage attributable to the flat x 1 year/total years of ownership

Thanks

Sam

Customer: replied 6 months ago.
Hi Sam
Here are all the details: The difference between Purchase Price and Sales Price is £50000 - £4565 Fees - £5700 Refurb = £39735 which will be taxed at 20%. The split between the Flat and the Shop is 67% Flat and 33% Shop! What reliefs can I claim in addition? Is this enough info?
Regards
Wayne
Expert:  Sam replied 6 months ago.

Hi Wayne

If you wish me to make a full calculation for you then I am afraid this will involve an additional charge - as this is work over and above general advise.

If you wish to proceed then I can send you an additional services request and I would also need to know when you purchased the property and its value - and the date of sale and the sale price and the actual month you moved into the flat

Also what the £5700 refurb costs were used for (to be sure they are allowable costs)

What trade you conducted in the retail unit - and has this trade ceased or just moved - and when the trade ceased

Thanks

Sam

Sam, Accountant
Category: Tax
Satisfied Customers: 13712
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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Customer: replied 6 months ago.
Hi Sam
Yes we might as well get it right.
Purchase was £55,000 on 21/04/2004. Sale was £105,000 on 12/08/2015.
I actually moved in after Refurb on 15/05/2013, so actually over 2 years.
Refurb was £4030 for Kitchen and Bathroom in Flat. The other £1670 was for a Shop Toilet and Racking in Shop, so maybe not deductible.
The business is a Hardware Shop, which I am still running from the same premises which I rent from the new owner, the new owner rents the Flat out to a third party.
Regards
Wayne
Customer: replied 6 months ago.
Hi Sam
I accepted your offer and paid £43. I also sent you the extra information you requested. Please advise of the status of my enquiry.
Regards
Wayne
Expert:  Sam replied 6 months ago.

Hi Wayne

I do apologise - for some reason your acceptance did not trigger a notification email to me.

Can I also ask for the costs to sell and buy (so any estate agent fees or legal fees) and re the refurb for the shop - the toilet will be allowable but not the racking (but the racking will be deductible against your trade profits)

So how much was the toilet to install ?

Thanks

Sam

Customer: replied 6 months ago.
Hi Sam
Toilet was £600. £1070 for Racking. Total Purchase and Sales fees are £4565.
Regards
Wayne
Expert:  Sam replied 6 months ago.

Hi

Thanks Wayne

I am calculating the full position for you - (Both private and business) and then will provide an overall position

I will respond in about 10 minutes

Thanks

Sam

Expert:  Sam replied 6 months ago.

Hi Wayne

So the initial gain is £105,000 sale price less purcahse price £55,000 = £50,00

Total period of ownership 136 months - and of this flat main residence for 15 months

From this we can then split the gain to reflect private and business

Flat 67% of £50,000 = £33,500

Less 67% fees of £4265 = £2858

Less Refurb £4030

Leaves gain of £26612

Private residence relief £26612 x 15/136 = £2935 exempt

Leaving a gain of £23,677 chargeable gain

Less annual exemption allowance of £11,100

Leaves a chargeable (personal) gain of £12577 liable to 28% (If you are a higher rate taxpayer or 18% if you have more than £12577 unused basic rate band - or a mix of the two rates - I can advsie further)
But if Higher rate (at 28%) = £3521.56

Business Retail Trade 33% x £55,000 = £18150

Fees 33% of £4265 = £1408

Refurb £600

Leaves gain of £16,142

Now as you have sold this asset but continue to trade you claim claim Entrepreneurs relief so the tax due on this element of the gain will just be at 10% = £1614.20

Then the personal capital gain bill £3521.56

Total capital gain bill £5135.76

Let me know if I can assist further

Thanks

Sam

Customer: replied 6 months ago.
Thanks Sam.
Regards
Wayne
Expert:  Sam replied 6 months ago.

You are very welcome Wayne

Thanks

Sam

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