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bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4807
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Having purchased a flat and a separate Freehold title to a

Customer Question

Having purchased a flat and a separate Freehold title to a property in London a few years ago I have now agreed to sell. The freehold was initially sold to me for a nominal amount,£2k, as there is little ground rent income from the flat above.

My buyer wishes to to apportion a disproportionate amount of his purchase price to the purchase of the F/hold title, some £300k.

Whilst I have no interest in his workings I am concerned that the freehold title does not constitute my home and therefore I maybe liable for tax on any increase in the sale price of the f/hold title......or can the entire sale be taken as the sale of my home?
Submitted: 3 years ago.
Category: Tax
Expert:  bigduckontax replied 3 years ago.
Hello, I'm Keith and happy to help you with your question.

I am at a slight loss to see how your freehold interest would not form part of your sole or main domestic residence and thus be entitle you to Private Residence Relief (PRR) on sale thus giving you a 100% exemption from Capital Gains Tax (CGT) on disposal. The fact that you acquired it effectively for a peppercorn is irrelevant.

However on rereading I am beginning to get the essence of the situation. You have the freehold of a building in multiple occupation so it is possible that only that element of the freehold interest that forms part of your dwelling is entitled to PRR. The rest of any gain on the freehold, which would be assessed at current market value, would be liable to CGT less your Annual Exempt Allowance of 11K and Lettings Relief of up to 40K.

I am of the opinion that you should seek local, professional advice on this matter as it might become highly complex. The solicitor who handles your sale for you should be able to assist. Capital Gains Tax is a thoroughly nasty tax which tends to creep up on one and bite entirely unexpectedly. You might well be in for a nasty, unexpected bill in this area.
Customer: replied 3 years ago.
Thank you for responding but in essence the advice to seek more advice and help is not really a definitive answer, not really any answer at all, so I'm not of an opinion that I should really be paying for this.

Apologies for being blunt but I do hope you understand where I am coming from?


Expert:  bigduckontax replied 3 years ago.
Oh, I quite understand where you are coming from Richard. I started my professional career as a trainee valuation surveyor in the old London County Council so I can see some problems here. Another professional is essential to help value the freehold element. All right, if there are but two flats of equivalent sizes it's not too much of a problem, but if they differ or garden sizes and parking lots become involved the computations become ever more complicated.

That is why I mentioned the use of additional professional advice. Otherwise the whole matter could become a Tom Tiddler's ground of argument with HMRC over the CGT element. Professional advice at a local level might save you a considerable sum of money.
Customer: replied 3 years ago.
Thank you but although the £30 fee I have paid is not by far my biggest problem in life would you agree that you have been unable to answer my question and therefore I should receive a refund for the amount paid?

I do appreciate some problems are not always answerable via this type of service so I am not making any judgements here, in fact your advice to seek more advice is indeed sensible advice!


Expert:  bigduckontax replied 3 years ago.
Richard, thank you for your comment. I answered a similar question some time ago involving a block of flats and consulted my good friend who trained with me and stayed in the surveying profession. he confirmed that these situations are highly complex and the CGT area almost insoluble.