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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15711
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We are husband & wife filling in tax returns online.

Customer Question

We are husband & wife filling in tax returns online. Normally an easy process but as we sold a house in London last year we need to fill in the cgt self assessment form. We don't know how to work out the "reliefs and elections". Have downloaded the CGT summary notes plus computation forms as PDF but we don't seem to be able to fill some parts in - some we can but others cannot be entered.
Submitted: 23 days ago.
Category: Tax
Expert:  bigduckontax replied 23 days ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Presumably this was a second home?

Customer: replied 23 days ago.
We bought it in 1997. We were working abroad and living in job related accommodation. Our children were using the house as we did when we returned 2x a year. Retired in 2007 and bought a house in Somerset in 2010. Son plus others rented the house from us until March 2016. House sold in June.
Customer: replied 23 days ago.
Would this £44 be on top of the £36 we paid just now?
Customer: replied 23 days ago.
Are you there?
Customer: replied 23 days ago.
We have paid £36 and have made no progress. All you have done is ask us a question!!
Expert:  bigduckontax replied 23 days ago.

I am sorry, but Just Answer is repeatedly dropping the lock and not allowing me to answer so I will opt out of this question, deep apologies.

Expert:  TonyTax replied 23 days ago.

Can you tell me how far you have got with your calculations so far please?

Customer: replied 23 days ago.
Nowhere!!
Expert:  TonyTax replied 23 days ago.

OK. If you can answer a few questions I should be able to take you through the form.

Expert:  TonyTax replied 23 days ago.

Which month in 1997 did you buy the house. What did it cost? What was the total of the purchase costs (legal fees, stamp duty, survey fees etc)? Did you decide to go and work abroad or were you sent by your existing employers? When exactly did you move abroad (month and year)? Did your children stay in the house when you left the UK? When you retired in 2007, did you return to the UK to live in the London house again? Which month in 2007 was that? When in 2010 did you move to Somerset? Was the London house let as soon as you moved out? You say the house was sold in June 2016. What was the exact date you exchanged contracts? How much did you sell it for? What was the total of the disposal costs (legal fees, selling agent fees etc)?

Customer: replied 23 days ago.
London house bought March 1997.
£ 155000
£ 5528 costs.
Teaching job in Malaysia accommodation job related.
August 1995.
Children stayed in house with other tenants known to family. Informal arrangement.
Retired 2007. Stayed in house with children/tenants until July 2010.
Moved to Somerset July 2010.
London house let fully 2010 - 2015.
We paid all bills.
Sold for £(###) ###-#### 5 June 2015.
£ 13030 expenses
Expert:  TonyTax replied 23 days ago.

Thanks.

Leave this with me while I do some calculations.

Expert:  TonyTax replied 23 days ago.

Can you confirm that you bought the property after you had left the UK?

Customer: replied 23 days ago.
house bought after we left UK. Bought a house nearby in 1995 prior to departure, sold 1997.
Customer: replied 23 days ago.
Ok thank you
Expert:  TonyTax replied 23 days ago.

Can you elaborate on the "informal arrangement" between 1997 and when you returned to the UK please.

Customer: replied 23 days ago.
2 sons and a daughter lived there at different times plus girlfriends/boyfriend and other friends who all contributed.
Expert:  TonyTax replied 23 days ago.

Thanks.

I don't think we can count that as a letting period so I will exclude it in my calculations.

Expert:  TonyTax replied 23 days ago.

Which month in 2007 did you return to the London property?

Customer: replied 23 days ago.
July 2007
Expert:  TonyTax replied 23 days ago.

Thanks.

I'll finish my calculations now.

Expert:  TonyTax replied 23 days ago.

You sold the property in June 2015 for £1,035,000 and made a gain of £861,442 (£1,035,000 sale proceeds - £155,000 purchase price - £18,558 purchase and selling costs). That's £430,721 for each of you. The following figures are for each of you individually:

Total period of ownership to June 2015: 219 months

Period of owner occupation: 36 months

Period of letting: 59 months

Period of vacancy: 124 months (occupied by children and others)

Exempt gain: £106,205 (£430,721 / 219 x 54 (36 + last 18 months of ownership)

Letting period gain: £80,637 (£430,721 / 219 x 41 (59 - last 18 months of ownership)

Vacant period gain: £243,879 (£430,731 / 219 x 124)

Gross Non-Exempt Gain: £324,516 (£80,637 + £243,879)

Letting Relief: £40,000 (lesser of £40,000, £106,205 and £80,637)

Annual CGT Exemption: £11,000

Net Taxable Gain: £273,516

CGT @ 18% or 28% or a combination of the two rates depending on the level of your income in 2015/16. Look here to see how to calculate your CGT rate.

I'll post again in a few minutes to tell you what figures go into what boxes on the CG pages and then you can ask me which of the CG worksheet boxs in the HMRC online return you are having problems with.

Expert:  TonyTax replied 23 days ago.

The SA108 pages should end up as follows:

Box 30 1, Box 31 £517,500, Box 32 £86,779, Box 33 £430,721, Box 35 LET (see page CGN3 here), Box 38 Private Residence Relief £106,205, Letting Relief £40,000, Box 3 £430,721. Calculation attached.

Customer: replied 23 days ago.
There is a clause in legislation which states that where an individual resides in accommodation which is job related and intends in due course to occupy the house they own, the property will be deemed to be their only or main residence. Although we did not occupy the property full time until 2007, the period of ownership prior to his time can attract PPR relief due to this provision. Do you agree with this and did you take this into account?
Expert:  TonyTax replied 23 days ago.

I realise that you were abroad for work. Absence relief which you can read about here does not apply apply because you didn't occupy the property both before and after the absence abroad began. If you had, the gain for that whole period would have been exempt from CGT. As for the job related accommodation law, I do know about that. Can you tell me how the accommodation was job related? I have in my mind a case where HMRC challenged an overseas job related accommodation claim on the basis that the fact that the individual was working overseas made the job-related accommodation aspect irrelevant. I will look at that and get back to you in the morning.

Customer: replied 23 days ago.
I was housemaster of a boarding house in Malaysia. Our flat was in the house and we had to live there because of the resident students.
Expert:  TonyTax replied 22 days ago.

Thanks.

I will get back to you today.

Customer: replied 22 days ago.
We bought a house prior to departure in 1995, sold and bought second house in 1997. Both were our main residences during the period of employment in Malaysia. We returned each year for a period of two months and stayed in the respective houses.
Since it was our main residence, why cannot it attract PPR relief?
Expert:  TonyTax replied 22 days ago.

The fact that you only owned one residence at any one time does not necessarily make it your main residence. A rented property could be a main residence.

Having looked at the legislation governing job-related accommodation, it makes no mention of that accommodation having to be in the UK so I'm leaning towards the period you were abroad counting as an exempt period. However, I'm waiting on some information from an online tax resource to confirm my belief or to counter it. I hope to get back to you today and will, if necessary, revise the caluclations.

Customer: replied 22 days ago.
Thank you
Expert:  bigduckontax replied 22 days ago.

You should be aware that the Inland Revenue lost the 'main residence' argument in the mid 70s when they tried to make the service quarters of servicemen their 'sole or main domestic residence' and make them pay Capital Gains Tax (CGT) on their privately owned properties. They had even got as far as getting the Ministry of Defence to issue a Defence Council Instruction (DCI) on the subject. I arrived in Nepal to find the garrison in uproar, but a quick letter drawing attention to the CGT legislation resulted in the Inland Revenue backing down and the DCI withdrawn with red faces all round.

Customer: replied 22 days ago.
Does this mean that allowances can apply? I presume you will be able to send your amended figures with this in mind.
Expert:  bigduckontax replied 22 days ago.

TonyTax is handling this detail.

Expert:  TonyTax replied 22 days ago.

All vey well, but it's not as if a solider has much choice about where he is staitioned compared to a civilian who makes the choice freely for the most part.

If the result of my research into foreign job related accommodation says it can be used to exempt that part of a gain related to the period overseas then it will make abig difference to the calculations. I will let you know later today.

Expert:  TonyTax replied 22 days ago.

I've done some research today and consulted some people I know who are expert in how tax law is drafted. The conclusion is that you won't get tax relief for the period that you were in job related accommodation abroad because it was your choice to go. The job related accommodation aspect is academic as it would not have been practical to return at weekends from Malyasia in any event, given the distance, which you might have been able to do if you were in job related accommodation in the UK. I have to say I'm not entirely convinced by that argument.

I mentioned the way tax law is drafted. The law for absence relief specifically mentions going abroad to work. Look here and here. The law for relief due to job related accommodation specifically does not mention going abroad to work. Look here, here and here. You may, however, get relief for the two months a year you lived in the property each year you were working abroad.

I would be happy to do some more calculations if you want to claim main residence relief for the period that you were abroad and, given that you have until 31 January 2017 to submit your returns, you have time to think about what you want to do. I will be more than happy to do some more research as there are a few sources of information I have yet to access. I'll also help you with the HMRC online tax return capital gains worksheet questions.

I have one question about your occupation of the flat in the student boarding house. Was your occupation of that flat part of a service agreement (with your employer) or a tenancy? If it was the latter, you won't get main residence relief unless you made an election for the UK property to be treated as your main residence (instead of the flat) within two years of having two to choose from.

I have to go out for a while but will beack in about 30 minutes.

Customer: replied 22 days ago.
have you read TGCA92/S223(3)?
Expert:  TonyTax replied 22 days ago.

Yes, I have. I referred to absence relief in my answer yesterday. Here it is "Absence relief which you can read about here does not apply apply because you didn't occupy the property both before and after the absence abroad began. If you had, the gain for that whole period would have been exempt from CGT."

Expert:  TonyTax replied 22 days ago.

Look here for the absence relief conditions.

Customer: replied 21 days ago.
Previously had a house in Walworth very near to the house we sold last year. Lived there BEFORE going to Malaysia (i.e. Main residence), sold it as too small and then bought*****which then became our main residence.we lived there AFTER returning.
Expert:  TonyTax replied 21 days ago.

It has to be same property for absence relief.

Expert:  TonyTax replied 5 days ago.

Hi.

I'm just following up to find out if my answer helped or if you have any further questions.

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