Can anyone confirm if I am calculating CGT correctly in the following scenario please?

An investment property was owned by a couple on a tennants in common basis. Partner 1 died and passed their half to the remaining partner, who decides to dispose of the asset a few years later. The original purchase price was £100k in 2000, the value at partner 1's death was £200k in 2006 and the value now is £150k, and there was 10k in expenses over the period of ownership. Is the following calculation correct?

Partner 1's share:
As inherited between partners, value for CGT starts at partner 1's death, ie 50% of £150k-£200k = -£25k

Partner 2's share:
Owned from outset, ie 50% of £200k-£100k = £50k

Partner 2's current CGT liability:
£50k - £25k - £10k (expenses) - £10.6k (tax free allowance) = £4.8k

So total CGT liability would be 18 or 28% of £4.8k depending on partner 2's tax rate?

Yes, partners were married - should have made that clear

The valuation was done by an estate agent, and is that value that was used for probate which wasn't questioned at the time.

Thanks David, so my maths would have been right if it wasn't for me inadvertently taking the surviving partners cost to be based on the peak price rather than the current price!

The costs mentioned include all appropriate maintenance/fees (all numbers in the example are made up so they may not be realistic!) Given that in this example the purchase/sale values balance to zero, then I think the additional costs are pretty much irrelevant?

Good point, how is that generally handled? I think the majority of maintenance costs were incurred at a time when no rental income was received (although the property was inhabited at that time if that makes any difference)

Yes - thats a fair summary.

I suspect that returns may have not been prepared...

David

Thanks for the help guys, very useful.

In essence then, any costs that have been reconciled in an annual tax return can't be included in the CGT tax calc? In this situation the bulk of maintenance costs have occurred more recently, in the period with no rental income and have not been reconciled on a tax return (ie, offset against future rental)- hence they should ok to include as costs for CGT purposes?

Ah I see! The main cost incurred is the installation of double glazing, which sounds like a fairly clear cut enhancement cost. Presumably then, the day to day costs are balanced against the rental income and the enhancement costs balanced against Capital Gains - the grey areas occurring in how any particular cost is classified.

Makes a lot more sense now, thanks again for your help!

One final question though - In this calc the cost price (for CGT purposes) for the dead partners half of the property starts at the time of death (and hence transfer to the surviving partner), due to the property being held as tenants in common and there being no tax liability when passing the asset to the surviving spouse. Is it correct that the gains between initial purchase and the death are effectively "lost" - I can't spot anything obvious on the HMRC site to contradict this?

Thought that was the case, was just shocked that HMRC don't claw it back elsewhere

Thanks again!