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Sam, Accountant
Category: Tax
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Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Rental Income, Capital Gains, CIS ask for Sam Tax
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, I've recently bought a house that's actually two semi-detached

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I've recently bought a house that's actually two semi-detached properties under one title. They have separate addresses and utilities, and the second property has previously been rented out, but I bought them as one sale.
I'd now like to sell off the second property - I understand I'll need to get my solicitor to arrange separate title, but what would be the CGT implications? I'll not be making any kind of profit, and even if prices had gone up it'd be difficult to give a value when the second property has never been bought or sold on its own anyway.
I'd assume I wouldn't be liable on the basis that I'd be making no profit as such, but even if so, what paperwork or other processes would I need to go through?

Thanks question - I am Sam and I am one of the UK tax experts here on Just Answer.
One has to assume that the purchase price would represent that 50% applied to each of the properties. So that will help you form the purchase price, and purchase costs, half the fees paid out to make this purchase.
Then this can be deducted form the eventual sale price to form the initial capital gain. From which you can then deduct the full selling costs and the costs of any major improvements on this second property (such as new bathroom, new kitchen etc)
If this sees a loss, then you claim the loss with HMRC, but if you are still in profit (Making again) then the first £11,000 is exempt and the ba***** *****able to capital gains tax.
Capital gains are at the rate of 18% or 28% or a mix of both - depending on your level of income and how much basic rate band remains unused (I can advise further on how that works if needed)
Customer: replied 3 years ago.


It wouldn't be so simple as a 50/50 split though, the two properties are very different in size. As I say, they've only ever been sold together so this would be the first time a value has been attached to them individually.

I'm still unsure as to what the process would be though... what would I need to do at the time of sale regards HMRC?

Then you apportion things according to the properties size or if you do not feel confident in this, then ask a local estate agent to split the value based on what you paid at the time with their expert knowledge , or as a final resort ask the local district valuer to come and provide a post valuation . Any of these ways would be more than acceptable to HMRC.
Once the property is sold. alert HMRC so they can arrange to set you up (if not already) assessment - this will then require you to complete a self assessment tax return to declare ALL income tax year. But as you have rental income I imagine you already complete self assessment, so only if you fill in a paper version of the tax return do you need to ask HMRC to issue the capital gains section on the return.
If you file your return online, then you just add in the capital gains section.
If you need help when its time to file the return, either consider engaging a local accountant OR we experts here on Just Answer can always help you with the paperwork - even through this Q & A style exchange of information! BUt you would record the purchase value, the purchase costs, the capital improvements carried out, the sale costs, the sale price so that the gain or loss could be established.
Do let me know if you require any clarification on the information provided, but it would be appreciated if in the meantime you could rate the level of service I have provided.
Customer: replied 3 years ago.

Thanks again.

, I don't normally do a self-assement and am PAYE - the property was rented out by the previous owner.

So, I'll have to inform HMRC that I need to do a self-assesment? And this is a legal requirement in the circumstances? I'm happy to apportion the relative values of the properties, but would this not need to be confirmed independently?

If, , the two properties were bought for £1m and I sold the smaller , then if I said that I thought it was 40% of the total property I'd not be liable . But an independent valuer might value them higher separately than I paid together, and at different percentages; perhaps at 600k and 500k two, so there'd now be a profit of 100k and I'd be liable significant amount of CGT.

From my perspective I'm not planning to make any kind of profit as such, just want to sell a portion of a property I've just bought. The values won't have changed, it just seems down to subjective valuation - I'm just not clear on what my obligations are.

Thanks response
Yes then do inform HMRC that you need to complete self assessment following the sale of the property - and just make sure you have that valuation in place from the purchase date.
Ideally it would be an independent valuation - but as you have the purchase price and if one property has one more bedroom than the other, or one has a conservatory and garage and the other doesn't, then a 55%/45% or 60%/40% split based on the difference is going be viewed as reasonable by HMRC
But you certainly cannot beat having an independent valuation carried out, and I would always recommend the local estate agent as a first port of call to officiate those values - then there is no dispute HMRC could raise.
And this further supports what you think might be the case, in your example !
I think you will find the valuations will have changed as a job lot of two would be harder to sell then each independent property - so you may find there is an immediate profit - and IF you plan to do a quick spruce up (which maybe you will not) this too can add a few thousand on, with just a lick of paint !
Whether you plan to make a profit is immaterial - you will be considered on the market value purposes (so if you sold it then HMRC would take issue) and the independent value of the property may actually be less or more than you thought - so in view of your concern most defiantly get an independent post valuation of the value at purchase date.
If after all the figures are done, the profits made are less than £11,000 then you will owe HMRC NIL, but you will know that has been acknowledged by HMRC, and they are aware of the sale.
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