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bigduckontax, Accountant
Category: Tax
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Flat next door purchased 12 months ago and let - now empty

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Flat next door purchased 12 months ago and let - now empty and will be knocked into one with our existing - where we have lived for the last 5 years.
What is the CGT position on ultimate sale ?
Hello, I'm Keith and happy to help you with your question.
The new dwelling will have an acquisition value based on the price of your flat plus the price of the other plus purchase costs plus improvements ie knocking the two together. If you have ever lived in the other flat then any gain would be entitled to Lettings Relief, but from what you say this seems unlikely which is a pity as it gives op to 40K of relief from CGT. Your final selling price will be for the new dwelling less costs of sale and the gain for CGT the difference between the two prices as calculated. Any other improvements eg new kitchens, installation of central heating, double glazing will inflate the acquisition price also and reduce the gain liable to CGT.
For the limited period of the letting of the flat to be converted there will have to be an adjustment to the Private Residence Relief (PRR) which will apply to the original one and, after conversion, to the new demense. This is worked out in months and I suspect that, allowing for your Annual Exempt Allowance of 11K (current tax year), it will be too small to create a liability.
I would advise you to obtain a current market value for the second flat before conversion, you may well need this at some future date.
I do hope I have shed some light on the position.
bigduckontax and other Tax Specialists are ready to help you
Thank you for your support.
Customer: replied 3 years ago.

That answers all I need to know

Thank you

Delighted to have been of assistance.