CGT - a bit tricky to calculate.....
Discussion
OK, so I could do with a bit of quick advice on a potential CGT issue I'll have coming up this year.......
One of my tenants has suggested that might like to buy my house this year (they've been in 5 years and it's always been on the cards). I'm mindful to sell all being well as the proceeds will pay off my own residential but I'd like to know what CGT I'm in for and it gets a bit complicated:
I bought the house as my PPR in 1996 for £65K and lived in at various points up to (I think) 2001 at which point the value was £135K when I went to the US for work for 4 years. I've not loved in it since but rented it out continuously (with the odd month break)and bought 2 more properties, one of which I moved into in 2005 when I moved back to the UK (value of original then £185K) and it was really my original PPR until then, but I understand that may not be the case due to renting it out but then again I see there are some reliefs for being sent overseas for work but only for 3 years and if you move back in after coming back
Value now is £200K and I'm trying to work out what my CGT liability is and how I calculate the relief on the last 3 years of deemed occupation (I have no idea on what to base this?). I've got a spreadsheet that suggests anywhere between an optimistic £800 based on the 2005 valuation and £34.5K
based on the 1996 valuation all using up my £10K personal allowance and 28% CGT....
Any ideas PH massive ?
One of my tenants has suggested that might like to buy my house this year (they've been in 5 years and it's always been on the cards). I'm mindful to sell all being well as the proceeds will pay off my own residential but I'd like to know what CGT I'm in for and it gets a bit complicated:
I bought the house as my PPR in 1996 for £65K and lived in at various points up to (I think) 2001 at which point the value was £135K when I went to the US for work for 4 years. I've not loved in it since but rented it out continuously (with the odd month break)and bought 2 more properties, one of which I moved into in 2005 when I moved back to the UK (value of original then £185K) and it was really my original PPR until then, but I understand that may not be the case due to renting it out but then again I see there are some reliefs for being sent overseas for work but only for 3 years and if you move back in after coming back
Value now is £200K and I'm trying to work out what my CGT liability is and how I calculate the relief on the last 3 years of deemed occupation (I have no idea on what to base this?). I've got a spreadsheet that suggests anywhere between an optimistic £800 based on the 2005 valuation and £34.5K
based on the 1996 valuation all using up my £10K personal allowance and 28% CGT....Any ideas PH massive ?
I am looking at this at the minute. If you move abroad for work, there is a possiblity that this is still your main residence and that you can add 3 more years to the 4 that you were abroad. I cannot recall the form, but when I find it from another thread I started I will post it here
founds 2 parts.... sorry. might be long winded
I´ve done a little more digging on this and it appears that there might be an exemption if my employment was outside the UK
http://www.hmrc.gov.uk/cgt/property/sell-own-home.... The full pages
The relevant parts are:
"Working away from home
You'll still get the full relief if you couldn’t live in your home because you were employed and either:
you carried on all of your work or duties outside the UK
the distance from work or the requirements of your job stopped you living at home - and you were absent for less than four years
The following must also apply:
the house was your only or main home both before and after you worked away
you were not entitled to Private Residence Relief on any other property during that time (see 'Owning more than one home' below if you're unsure)
If you can't return to live in the house because your existing job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
Example
You bought a house in 1994 and used it as your main home.
Your employer sent you to work abroad in 1995.
You returned to your main home in 2000 and lived in it until you sold it in 2011.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad"
It looks like anyone working away from home gets relief however.......
Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
Example
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
£40,000
£36,000 (the Private Residence Relief due)
£24,000 (the gain on the part of the property that's been let)
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
Arrgghhhhhh it looks like I need to talk to the tax people... but helpsheet 283 gives me some hope!!
Details from sheet 283
Certain other periods of absence from your dwelling house may be treated
as periods of residence if:
• during the period, you have no other dwelling house eligible for relief, and
• both before and after the period there is a time when the dwelling house is
your only or main residence.
If you have another dwelling house eligible for relief, for example a house or
flat which you bought or rented as your home while absent, you will need to
make a nomination in favour of the original dwelling house, if you want the
period of absence to be treated as a period of residence at that house, see
‘Only or main residence’ on page 3.
The qualifying periods of absence are:
a. absences for whatever reason, totalling not more than three years in all
b. absences during which you are in employment and all your duties are
carried on outside the UK
c. absences totalling not more than four years when
— the distance from your place of work prevents you living at home, or
— your employer requires you to work away from home in order to do
your job effectively.
You will keep the exemption for absences b. and c. if you cannot return to
your dwelling house afterwards because your existing job requires you to
work away again.
Example 7
You bought a house in 1984 and used it as your only or main residence. In 1985 your
employer required you to work abroad and you did not come back to the house until 1990.
You lived in the house again as your only or main residence until you sold it in 2011. You
are entitled to full relief.
Someone on the other thread did say that if you are working abroad, that does not count as part of your 3 years, but I am yet to find this out from a tax specialist
founds 2 parts.... sorry. might be long winded
I´ve done a little more digging on this and it appears that there might be an exemption if my employment was outside the UK
http://www.hmrc.gov.uk/cgt/property/sell-own-home.... The full pages
The relevant parts are:
"Working away from home
You'll still get the full relief if you couldn’t live in your home because you were employed and either:
you carried on all of your work or duties outside the UK
the distance from work or the requirements of your job stopped you living at home - and you were absent for less than four years
The following must also apply:
the house was your only or main home both before and after you worked away
you were not entitled to Private Residence Relief on any other property during that time (see 'Owning more than one home' below if you're unsure)
If you can't return to live in the house because your existing job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
Example
You bought a house in 1994 and used it as your main home.
Your employer sent you to work abroad in 1995.
You returned to your main home in 2000 and lived in it until you sold it in 2011.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad"
It looks like anyone working away from home gets relief however.......
Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
Example
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
£40,000
£36,000 (the Private Residence Relief due)
£24,000 (the gain on the part of the property that's been let)
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
Arrgghhhhhh it looks like I need to talk to the tax people... but helpsheet 283 gives me some hope!!
Details from sheet 283
Certain other periods of absence from your dwelling house may be treated
as periods of residence if:
• during the period, you have no other dwelling house eligible for relief, and
• both before and after the period there is a time when the dwelling house is
your only or main residence.
If you have another dwelling house eligible for relief, for example a house or
flat which you bought or rented as your home while absent, you will need to
make a nomination in favour of the original dwelling house, if you want the
period of absence to be treated as a period of residence at that house, see
‘Only or main residence’ on page 3.
The qualifying periods of absence are:
a. absences for whatever reason, totalling not more than three years in all
b. absences during which you are in employment and all your duties are
carried on outside the UK
c. absences totalling not more than four years when
— the distance from your place of work prevents you living at home, or
— your employer requires you to work away from home in order to do
your job effectively.
You will keep the exemption for absences b. and c. if you cannot return to
your dwelling house afterwards because your existing job requires you to
work away again.
Example 7
You bought a house in 1984 and used it as your only or main residence. In 1985 your
employer required you to work abroad and you did not come back to the house until 1990.
You lived in the house again as your only or main residence until you sold it in 2011. You
are entitled to full relief.
Someone on the other thread did say that if you are working abroad, that does not count as part of your 3 years, but I am yet to find this out from a tax specialist
Edited by The jiffle king on Saturday 18th February 14:59
Just spotted this. What forum was it in previously?
I don't do calculations on the forum - that's too much like work.
I think the basic principles have already been outlined anyway.
You obviously get your period of ownership exempted plus the three "free" years.
If your work moved you abroad, than the property can still meet the main residence criteria anyway - although certain conditions need to be met.
Don't forget your CGT annual allowance - and you get two of these if the property is jointly owned.
Finally, there could also be Commercial Letings Relief avaiable.
I don't do calculations on the forum - that's too much like work.
I think the basic principles have already been outlined anyway.
You obviously get your period of ownership exempted plus the three "free" years.
If your work moved you abroad, than the property can still meet the main residence criteria anyway - although certain conditions need to be met.
Don't forget your CGT annual allowance - and you get two of these if the property is jointly owned.
Finally, there could also be Commercial Letings Relief avaiable.
I stuck this in SP&L fit no good reason Eric
I don't think I'll meet the overseas work bit as I left for more than 3 years (it was just under 4 years officially) and because I didn't move back into it when I came home (I'd bought another house and moved into that).
Not jointly owned but I've used the annual relief so think I have the sums right-ish assuming I've got the 3 years deemed occupation bit right?
I don't think I'll meet the overseas work bit as I left for more than 3 years (it was just under 4 years officially) and because I didn't move back into it when I came home (I'd bought another house and moved into that).
Not jointly owned but I've used the annual relief so think I have the sums right-ish assuming I've got the 3 years deemed occupation bit right?
Mmmm, I lived it (on and off) for 5 years but have no records as that's 15 years ago now and at that stage I fully expected to move back in......
My hope is that I can base price at the last time I moved out (when one can argue it was no longer my PPR) rather than purchase price as this should reduce my CGT bill significantly due the big price rises in the late 90's. However, sounds like I have to use orig purch price and then assume I lived there for 8 years (5 lived in plus the 3 deemed) but not the extra for being sent overseas to work? :-(
My hope is that I can base price at the last time I moved out (when one can argue it was no longer my PPR) rather than purchase price as this should reduce my CGT bill significantly due the big price rises in the late 90's. However, sounds like I have to use orig purch price and then assume I lived there for 8 years (5 lived in plus the 3 deemed) but not the extra for being sent overseas to work? :-(
Eric Mc said:
Are you taking the Commercial Letting Relief into account?
Are you taking into account the CGT Allowance?
Are you taking into account any enhancement expenditure that may have been incurred on the property during your ownership?
Not sure I'd qualify for commercial letting relief as this a private dwelling and has been 100% let when rented out. The HMRC guide sheet is simply confusing (and I'm an Accountant!)Are you taking into account the CGT Allowance?
Are you taking into account any enhancement expenditure that may have been incurred on the property during your ownership?
Am taking into account the annual CGT allowance for this year (£10,600)
No enhancement during ownership that I can think of that would qualify (apart from a new boiler but that's simply maintenance)
If you offset the cost against rental income at the time then, no, you won't get any CGT relief.
However, if you DIDN'T offset the cost of the boiler against the rents in the year the expenditure was incurred, I would certainly want to claim it as Enhancement Costs against CGT. Indeed, any maintenance costs that weren't claimed against rents could be looked at in this way.
However, if you DIDN'T offset the cost of the boiler against the rents in the year the expenditure was incurred, I would certainly want to claim it as Enhancement Costs against CGT. Indeed, any maintenance costs that weren't claimed against rents could be looked at in this way.
PLEASE pay Eric Mc (or another accountant) to prepare this bit of your return! It is notoriously tricky and accountant's fees are always money well spent (IME).
I was in a similar situation: bought a flat as my (only) home in '93 for £84k, lived there, moved abroad, rented it out, lived in it again, bought another house to live in, rented the flat out, and then sold it for £380k in '07). My eventual CGT liability was under £5k. As my own back-of-envelope cack-handed calculation was for about £20k, I was more than happy to pay for the advice.
I was in a similar situation: bought a flat as my (only) home in '93 for £84k, lived there, moved abroad, rented it out, lived in it again, bought another house to live in, rented the flat out, and then sold it for £380k in '07). My eventual CGT liability was under £5k. As my own back-of-envelope cack-handed calculation was for about £20k, I was more than happy to pay for the advice.
uuf361 said:
Eric Mc said:
Are you taking the Commercial Letting Relief into account?
Are you taking into account the CGT Allowance?
Are you taking into account any enhancement expenditure that may have been incurred on the property during your ownership?
Not sure I'd qualify for commercial letting relief as this a private dwelling and has been 100% let when rented out. The HMRC guide sheet is simply confusing (and I'm an Accountant!)Are you taking into account the CGT Allowance?
Are you taking into account any enhancement expenditure that may have been incurred on the property during your ownership?
Am taking into account the annual CGT allowance for this year (£10,600)
No enhancement during ownership that I can think of that would qualify (apart from a new boiler but that's simply maintenance)
If the rent was at market value, you definitely qualify for Lettings Relief (LR) of (up to) £40,000 per owner. If the latter, there is a possibility that LR may be restricted/denied - personally, I don't think so, even if the rent was a peppercorn.
If relevant, an inter-spousal transfer of a share of the property prior to sale might be advantageous.
Eric Mc said:
I was being fairly general in my description just so that the OP might be aware that there were other reliefs out there that might be appropriate. I wasn't going to go into detail on the basis that I like to be paid for doing real work for clients.
Agreed.It was the word "Commercial" which might be ambiguous.
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