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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15979
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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We have a CGT question on a gifted property which we

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Hello,We have a CGT question on a gifted property which we sold last year. Would we be able to ask you for advice.
Hi. Yes. What is the question?
Customer: replied 2 years ago.
We were sold a property by a family member in March 2011 at a reduced 50k price (market value 112k). We sold the property ourselves in Nov 2014 for 100k. According to the tax forms online, we have actually lost money but in reality because of the gifted price, we think we have made profit.
What is your relationship to the family member?
Customer: replied 2 years ago.
The property was our main home but rented out until Sept 2013 (so within 18 months of us selling), so we don't qualify from a CGT exemption, we don't think.
Customer: replied 2 years ago.
My husband's grandmother
Can you tell me during which period you lived in the property please.
Customer: replied 2 years ago.
we lived there before it was purchased, technically from May 2002 until March 2012
Thanks. Leave this with me while I draft my answer. It will take a while so please bear with me.
Customer: replied 2 years ago.
we had to relocate for work and were renting the property out until it was finally sold in Nov 2014
Can you elaborate on that last point please.
Customer: replied 2 years ago.
We had to move to another part of the UK in Nov 2011 (6 months after buying). The flat was then rented out from March to Aug 2012 and then again from Sept 2012 to Sept 2013.
Did one of your employer's have you move to a different part of the UK?
Customer: replied 2 years ago.
no, I got a new job and we kept the property while trying to find out whether the relocation was going to be permanent or not.
OK, thanks. That should be enough for me to prepare an answer.
Customer: replied 2 years ago.
Thank you! Not sure if you need to know mortgage details i.e. that when we purchased the property this was through a mortgage. If not, then please disregard this.
Can you just clarify something for me please. Was the property empty from September 2013 to the date of sale? You said "we had to relocate for work and were renting the property out until it was finally sold in Nov 2014". You also said that it was let from September 2012 to September 2013.
Customer: replied 2 years ago.
yes, we were trying to sell it for over a year and had 3 failed sales, so empty and we were trying to sell it
Since your husband and by extension yourself are connected to his grandmother for CGT purposes you will be treated as having paid the open market value of the property. Take a look here for confirmation: Your cost is, therefore, £112,000, £56,000 for each of you. As the property was sold for £100,000, you have made a loss of £12,000, £6,000 for each of you. However, given that the property was your main home for a while, that part of the loss will not be an allowable loss. Nor will the loss for the final 18 months of ownership. The only allowable part of the loss will be for the period that the property was let. The calculation is as follows for each of you individually: Total period of ownership to November 2014: 45 monthsPeriod of owner occupation: 13 monthsPeriod of letting: 18 monthsPeriod of vacancy: 14monthsExempt loss: £4,133 (£6,000 / 45 x 31 (13 + last 18 months of ownership))Letting period loss: £1,867 (£6,000 / 45 x 14 (18 - 4 of last 18 months of ownership))Vacant period loss : £0 (£6,000 / 45 x 0 (14 - 14 of last 18 months of ownership))Allowable Capital Loss:£1,867 (£6,000 - £4,133) Refer to HS283 for information on the main residence and CGT. You might also look here for information on absences. Had you reoccupied the property before it was sold, the whole loss may have been treated as a loss on disposal of a main residence and none of it would have been an allowable capital loss. I hope this helps but let me know if you have any further questions.
Customer: replied 2 years ago.
Thank you for this, Tony. I see what you mean. We were more worried about owing CGT than the amount of possible loss. Based on what you have said though, we can proceed with the £56,000 (paid) and sold at £50,000 figures.
Can I check I understand this correctly - if we'd moved back for a bit before selling, we might have been able to claim a bigger loss but overall, the calculations show a loss either way and no CGT to pay. Thanks again.
If you had moved back in to the property, the whole loss could have been treated as a non-allowable loss assuming you didn't buy another property when you initially moved away. Conversely, given the same scenario, any gain would have been fully exempt from CGT if the entire period of ownership had been treated as a period of occupation.
Customer: replied 2 years ago.
No, we didn't buy another property - we were renting ourselves while we were away from the property, so that was the only property we owned during that time.
So to summarise, no CGT to pay but it's debatable how the loss can be viewed based on letting, absences. Can we leave the loss as it is (6k) and just offset legal costs? (sorry about all the questions / pls let me know if we are over the limit on this query).
You can only claim £1,867 each as your capital loss which assuming you have no other gains in the same tax year will be carried forward to use against gains you may make in the future.
Customer: replied 2 years ago.
I think we finally understand what you mean! Final question - how do we say we have arrived at this figure on the forms. Do we submit a separate document as the computational worksheet hasn't got fields to amend the figure from £6000 to £1,867. thank you again
You have to attach a calculation. If you are using the HMRC software, use the worksheet in the capital gains section. That will provide HMRC with all they need.
Customer: replied 2 years ago.
oh okay, the only free text section I can see in the worksheet is the "Description of elections made and of reliefs claimed or due" . Would it be fine to put the calculations there?
You have to complete the boxes that require figures too. Alternatively, if you can copy my calculation and convert that document into a PDF you can attach that to your tax returns.
Customer: replied 2 years ago.
I will attache you calculations further in the along as there is nowhere on the form to add them see attached.
Divide the loss of £8,370 by 45 and multiply the result by 14 to get £2,604. That is your allowable loss. The difference between £2,604 and £8,370 is what you put in the Deductions box. Then you need a write a note with no more than 240 characters telling HMRC that only 14 months worth of the loss is allowable. You might be better off referring HMRC to the main white space in the return where you can explain more fully.
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Customer: replied 2 years ago.
okay, I see what you mean. I will proceed with the form and try to explain the calculations and add the explanation. I now understand the way you have calculated everything. many thanks! you have been extremely helpful. thank you!
Customer: replied 2 years ago.
Apologies, it's me again. I wasn't able to put a negative value in the deductions box (I tried putting £-5766), so have referred HMRC to the calculations at the end. Hope that seems alright to you.
Put a positive figure in the box. As there is a loss above it, it will reduce it.
Customer: replied 2 years ago.
When I did that, it said my loss was higher, i.e.
Chargeable gain or loss:
£ -14136.00
(it added up the 8370 & 5766), which is why I tried the negative figure
That's odd. I think your note will cover it.
Customer: replied 2 years ago.
is it actually here that I need to put the adjustment - I just came across this question now and it lets me put a negative figure
Customer: replied 2 years ago.
sorry, meant this image:
Take the £5,766 out of the claims box and put it in the adjustments box.
You beat me to it.
Customer: replied 2 years ago.
okay, great, I did that but put a negative amount, - £5766 to make clear it wasn't profit but a loss. thanks again
The right allowable loss figure is in the final box so that's all that matters.
Customer: replied 2 years ago.
Excellent! I am glad I won't have to do that again and such a relief we didn't have to pay CGT. Have a nice evening and thank you for being so thorough and helpful!
Thanks. Here's a tip: If you have to complete a tax return in future, do it earlier. It's far less stressful when you aren't trying to beat the clock.
Customer: replied 2 years ago.
We tend to be a last-minute submitters, unfortunately. Have been for a couple of years but tend to get it done before midnight usually. :)