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bigduckontax, Accountant
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I'm currently completing my 2016/17 tax return & have a CGT

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Hi, i'm currently completing my 2016/17 tax return & have a CGT query. I inherited a property (my childhood home) which i sold in October 2016. The probate valuation was £375k & was sold for £560k, so a gain of £185k. This was a 50% share along with my Brother so my personal gain was £92,500. I have researched & have a couple of questions please:
1: As the property was my childhood home (i lived here 1980-2002) is there any CGT relief for this or is the date too far in the past?
2: i have been told that your annual CGT allowance can roll over for years when not utilised, is this the case as i have never used it previously.
3: Are there expenses against the house being maintained & sold which i can offset against the Gains?
Anything else you think would be useful info would be great too!
Thanks!

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

1.What date did you inherit the property? If it was after 2002 then your occupation is of no use to you in reducing your CGT exposure.

2. This is quite incorrect. The Annual Exempt Amount (AEA), currently 11.3K, is non cumulative.

3. The cost of dales including advertising can be deducted to derive a net selling price.

Was this house your sole or main domestic residence? Did you ever occupy it? Did you ret it out?

Correction under 3. delete 'dales' insert 'sales.'

Customer: replied 4 months ago.
Hi - thanks for the prompt reply...
1 - it was after 2002 so i'll ignore that one for me, howeber my brother lived there as his main residence up until the property was sold. does that mean he doesnt have to pay any CGT on it or just a reduction?
2 - thanks for clarifying, i thought that was the case
3 - OK, i'll calculate the costs & use the net sale price to derive the gains.
this house was my main domestic residence up until 2002, when i moved out after university. My brother remained in the property so it was never rented out even after it was inherited.

1. Correct, Private Residence Relief (PRR) applies and although he is liable to CGT on the gain he made PRR relieves it at 100%. He will have no tax to pay.

2. Good, you understand the position regarding the AEA.

3. For the last 18 months of ownership you are deemed to be in residence even if this is not the case and PRR is extended. There will be an adjustment to your gain to be made. Take the total ownership time in months. Now take that less 18 months. The second figure over the first will give you the proportion to reduce your gain. Now deduct the AEA. The balance will be taxed at 18% or 28% or a combination of the two rates depending on your income including the gain in the tax year of sale. 92.5K - 11.3K = 81.2K, so a worst case scenario is a tax bill of a tad over 22.7K. It will be less than that though.

I assume that your brother never paid any rent to you for his occupation.

I do hope that you have found my reply of assistance.

Customer: replied 4 months ago.
sorry - just one clarifying point before i go:
When you say ownership time, the property was bought by my parents in April 1980, but inherited by us on 2/12/2012. If its the duration the property was owned by me then that would be 47 months. 47 months minus 18 months = 29 months. So to calculate the reduction of the gain i divide 29/47=0.617 * £92500 = £57,072.50, is this correct? Where does the 18 months duration come from? is it a standard duration anyone can be allowed in this scenario? thanks again..

Say 62% of the gain is taxable, that is 57K so the worst case tax bill is of the order of a tad under 16K.

The 18 months assumed occupation is provided for in the legislation. It used to be 3 years, but has since been reduced. Even HMRC accept that landed property cannot be disposed of as quickly as, say, a secondhand car.

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Customer: replied 4 months ago.
that's great - thanks for all your help 5*

Delighted to have been of assistance.

Thank you for your excellent support.

Customer: replied 3 months ago.
Hello again - i have sent my accountant these calculations & she maintains that as i didn't physically live in the property during the period of my ownership that i cannot claim any - even partial - PRR for the assumed 18 months of occupation. She has said that i would need to provide proof of residency to claim any part of PRR. Can you clarify? thanks!

I suggest that you employ an accountant with a more comprehensive knowledge of Capital Gains Tax than is currently being displayed.

For the last 18 months of ownership you are deemed to be in residence even if this is not the case. This rule has been in place many years, indeed it used to be 3 years until reduced to 18 months. There is no requirement to prove anything and the advice you have received is mere balderdash and piffle.

Customer: replied 3 months ago.
Thank you again, I may just do that!

Pleased to have been able to point you in the right direction.

Customer: replied 3 months ago.
Hi - I have sought second opinions from two other accountants on this matter & both have agreed with my accountant that I do not qualify for PPR relief.
The HMRC guidance states that:Period of ownership
Your period of ownership begins on the date you first acquired the dwelling house, or on 31 March 1982 if that is later. It ends when you dispose of it. The final 18 months of your period of ownership always qualify for relief, regardless of how you use the property in that time, as long as the dwelling house has been your only or main residence at some point.I pushed them on the interpretation of “at some point” as I have lived there, just not since my period of ownership. This is the point they make for my not qualifying for PPR, they believe “at some point” is “at some point during the period of ownership”. I called HMRC to clarify this point & they also confirmed my scenario doesn’t qualify....

I can only suggest that you approach accountants with a more comprehensive knowledge of CGT than is currently being displayed. If you owned it and occupied it as your sole or main domestic residence then for that period and the last 18 months of ownership PRR applies. Any other interpretation so simply balderdash and piffle. HMTC employees only answer telephone queries from a very restrictive set of prepared answers and anything outside these leaves them unable to effectively respond.

Customer: replied 3 months ago.
but the specific point they are raising is that it wasn’t my residence when I owned it. It was only my residence when my parents owned it, before they passed away & I inherited it.
Are you saying that even though I did NOT live there after I owned it I can still claim the relief?

Only if it were your sole or main domestic residence.

Customer: replied 3 months ago.
It was, but not when I owned it. That’s the scenario

Sorry, how could it have been before you owned it?

Customer: replied 3 months ago.
I lived there as my childhood home (as my main residence) but did not own it until I inherited it (when I was living I my own home)

Just to make absolutely certain which you owned, did not rent.

Customer: replied 3 months ago.
1980-2002: lived there as my childhood home
December 2012: inherited property. Did not live there. Did not rent it as my brother lived there.
October 2016: sold the property

We are going round in circles and you are not answering my questions. You say you did not live there so where did you live? Did you own the residence or did you rent it?

Customer: replied 3 months ago.
I am answering your question.The house was my childhood home. I inherited it when my parents died. I didn’t then move back into my childhood home, I remained in my own house with my own family!

Yes, I've got that, but did you own that house or rent it?

Customer: replied 3 months ago.
My own home I own. I’ve owned my own home since 2006

This does not alter my original answer. Your PRR entitlement is for the last 18 months of ownership only.