Capital gains tax question..
Discussion
Way back in 1987, I purchased some town centre commercial property (a shop) from Whitbread plc, paying £18500 at the time....(it was undervalued then)
I had the property independently valued last month, and due to town centre redevelopment, and inflation, been advised it is now worth around £400,000+.....
Now, I do not intend to sell it just yet, but if I did, does anybody have any idea, what amount of CGT I would be liable for, as I believe there is a formula that takes into account the number of years you have owned the property, in this case eighteen......
Ta muchly....:)
I had the property independently valued last month, and due to town centre redevelopment, and inflation, been advised it is now worth around £400,000+.....
Now, I do not intend to sell it just yet, but if I did, does anybody have any idea, what amount of CGT I would be liable for, as I believe there is a formula that takes into account the number of years you have owned the property, in this case eighteen......
Ta muchly....:)
Is it a business property?
There are two formulae you will need to apply - indexation from the date of purchase to 5 April 1998 and Taper Relief from 6 April 1998 to the date of sale.
Is the property in joint names?
Each individual is entitled to offset their 2005/06 Capital Gains Exemption limit of £8,500 against the gain before tax is calculated.
Finally, all the original purchase costs, all the selling costs and any capital enhancement costs in the period of ownership can also be deducted before calculating the chargeable gain.
Indexation (if appropriate) can also be applied to the enhancement costs.
CGT is calculated at the individual's top rate of tax - usually 40%.
>> Edited by Eric Mc on Monday 29th August 14:47
There are two formulae you will need to apply - indexation from the date of purchase to 5 April 1998 and Taper Relief from 6 April 1998 to the date of sale.
Is the property in joint names?
Each individual is entitled to offset their 2005/06 Capital Gains Exemption limit of £8,500 against the gain before tax is calculated.
Finally, all the original purchase costs, all the selling costs and any capital enhancement costs in the period of ownership can also be deducted before calculating the chargeable gain.
Indexation (if appropriate) can also be applied to the enhancement costs.
CGT is calculated at the individual's top rate of tax - usually 40%.
>> Edited by Eric Mc on Monday 29th August 14:47
mutt k said:
Think you will get charged CGT on 60% of any gain since 1998 as you have held the asset for more than 10 years. Presume an accountant will be along shortly to confirm or otherwise
(Waits for Eric Mc...) (Edited to add - he got there first!)
IIRC you use indexation from 1987-1998, and then should get taper relief 1998-2005. If the ownership of the property is considered a business asset, you get 75% relief (i.e. instead of paying 40% tax, you pay 10%). For a non-business asset the maximum relief is 40%, i.e. you pay 24% tax, but the taper relief is at a far slower rate so you may not be there yet...
See www.hmrc.gov.uk for much confusion and hard to find info.
I still can't find the taper relief tables... >> Edited by Size Nine Elm on Monday 29th August 14:49
Eric Mc said:
Those two factors will go a long way to mitigating your personal CGT bill.
Just one further clarification needed - is the property owned PERSONALLY by you and your brother or is it owned through some sort of an intermediary such as a limited company or a trust.
Hi Eric...
No, The property is owned personally by the two of us as a partnership.
Thanks once again for your helpful advice....
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