CGT on second home. Questions.
Discussion
Bought in 2019 for me to use midweek, and sold recently as have a job closer to home.
Increase in 4 years 30k
Jointly owned.
https://www.gov.uk/report-and-pay-your-capital-gai...
So I’ve read this guide and I’m pretty sure:
We divide every calculation by 2.
1) we can offset all Buying costs (Solicitors, land registry fees, searches) AND the Stamp duty. £3615 each
2) We can offset selling costs (Solicitors and Estate agents fees) £1644 each
What I’m less sure about is:
3) Mortgage Penalty cost…the cost of selling it now, rather than later due to having a 5 year fixed that ends in 4 years. approx. £1500 each. I Can’t see anything about that, either way in the guidance.
4) Improvements….When we fixed the roof, we could have “repaired” it like for like for £1000, someone could have gone up on a ladder, and removed the crumbling mortar from the chimney stacks, and replaced JUST that.
Instead we “improved” it by
- adding new insulation, that could only be added with the roof off (as there’s no loft access)
- Adding new breathable membrane (there was none at all)
- Cutting in lead flashing into the chimney stacks to upgrade the joint from.crumbling lime mortar
£4000 Each.
Maybe we should reduce the Roofing cost by £1000 to note the difference, between repair and improvement
Are these last 2 figures allowed ?
Increase in 4 years 30k
Jointly owned.
https://www.gov.uk/report-and-pay-your-capital-gai...
So I’ve read this guide and I’m pretty sure:
We divide every calculation by 2.
1) we can offset all Buying costs (Solicitors, land registry fees, searches) AND the Stamp duty. £3615 each
2) We can offset selling costs (Solicitors and Estate agents fees) £1644 each
What I’m less sure about is:
3) Mortgage Penalty cost…the cost of selling it now, rather than later due to having a 5 year fixed that ends in 4 years. approx. £1500 each. I Can’t see anything about that, either way in the guidance.
4) Improvements….When we fixed the roof, we could have “repaired” it like for like for £1000, someone could have gone up on a ladder, and removed the crumbling mortar from the chimney stacks, and replaced JUST that.
Instead we “improved” it by
- adding new insulation, that could only be added with the roof off (as there’s no loft access)
- Adding new breathable membrane (there was none at all)
- Cutting in lead flashing into the chimney stacks to upgrade the joint from.crumbling lime mortar
£4000 Each.
Maybe we should reduce the Roofing cost by £1000 to note the difference, between repair and improvement
Are these last 2 figures allowed ?
"Enhancement" expenses are allowed. HMRC describes "enhancement" costs as costs which actually improve the property rather than just restore it to its previous state. So, ordinary painting and decorating is not allowed. Replacing a roof is NOT allowed. Adding an extension IS allowed. Replacing single glazed windows with double glazed windows IS allowed.
I'll leave it up to you to decide which category your costs fall into.
Don't forget. you have a window of 60 days after the date of sale to submit your CGT calculations AND pay the CGT itself.
As the property is jointly owned, each owner has to register and submit their half of the CGT calculations and pay their share within the 60 day time period.
I'll leave it up to you to decide which category your costs fall into.
Don't forget. you have a window of 60 days after the date of sale to submit your CGT calculations AND pay the CGT itself.
As the property is jointly owned, each owner has to register and submit their half of the CGT calculations and pay their share within the 60 day time period.
3. is not allowable.
Here's some more discussion on the topic from HMRC.
https://www.gov.uk/hmrc-internal-manuals/property-...
As Eric suggests, it can be a grey area. Personally, if you already had insulation up there, then I would say it's repair rather than improvement. You may feel differently and so may HMRC. Also the lead flashing is minor and again I'd say a repair.
Here's some more discussion on the topic from HMRC.
https://www.gov.uk/hmrc-internal-manuals/property-...
As Eric suggests, it can be a grey area. Personally, if you already had insulation up there, then I would say it's repair rather than improvement. You may feel differently and so may HMRC. Also the lead flashing is minor and again I'd say a repair.
To be clear. Most of the roof tiles were removed, so that a new breathable membrane, could be installed. To do that they had to remove the laths. Once the laths were removed, we could get loft insulation in there. The loft insulation, was more an after thought. We could probably have cut a hole in the ceilings and climbed into the void, which is about 3 foot high.
They broke a few tiles, and these were replaced.
On the chimney stacks there was no flashing, just lime mortar, bridging the gap.
They could have repaired the crumbling mortar on the 2 stacks by going up on a ladder, gaining access from next doors flat roof.
Because of the desire to upgrade to a menbrane, (looks to have not been built with one in 1848) we needed to pay for scaffolding. That was in with the price, but we had some verbal quotes for the cheapest fix. And they were in the £1000 region.
So I'm estimating that £7k was improvement and £1000 repair, to put it back to 1848 spec.
They broke a few tiles, and these were replaced.
On the chimney stacks there was no flashing, just lime mortar, bridging the gap.
They could have repaired the crumbling mortar on the 2 stacks by going up on a ladder, gaining access from next doors flat roof.
Because of the desire to upgrade to a menbrane, (looks to have not been built with one in 1848) we needed to pay for scaffolding. That was in with the price, but we had some verbal quotes for the cheapest fix. And they were in the £1000 region.
So I'm estimating that £7k was improvement and £1000 repair, to put it back to 1848 spec.
Eric Mc said:
Replacing single glazed windows with double glazed windows IS allowed.
Interesting thought, given that HMRC specifically allow replacement of single glazing with double glazing as a revenue rather than capital expense (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46925), and also specifically prohibit the deduction of any expense which would have been allowable as a revenue expense as a capital expense (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14300).Other than that, I agree
Pit Pony said:
To be clear. Most of the roof tiles were removed, so that a new breathable membrane, could be installed. To do that they had to remove the laths. Once the laths were removed, we could get loft insulation in there. The loft insulation, was more an after thought. We could probably have cut a hole in the ceilings and climbed into the void, which is about 3 foot high.
They broke a few tiles, and these were replaced.
On the chimney stacks there was no flashing, just lime mortar, bridging the gap.
They could have repaired the crumbling mortar on the 2 stacks by going up on a ladder, gaining access from next doors flat roof.
Because of the desire to upgrade to a menbrane, (looks to have not been built with one in 1848) we needed to pay for scaffolding. That was in with the price, but we had some verbal quotes for the cheapest fix. And they were in the £1000 region.
So I'm estimating that £7k was improvement and £1000 repair, to put it back to 1848 spec.
Personally I think this applies to you:They broke a few tiles, and these were replaced.
On the chimney stacks there was no flashing, just lime mortar, bridging the gap.
They could have repaired the crumbling mortar on the 2 stacks by going up on a ladder, gaining access from next doors flat roof.
Because of the desire to upgrade to a menbrane, (looks to have not been built with one in 1848) we needed to pay for scaffolding. That was in with the price, but we had some verbal quotes for the cheapest fix. And they were in the £1000 region.
So I'm estimating that £7k was improvement and £1000 repair, to put it back to 1848 spec.
'Problems can arise where the customer does work on an old asset. A repair or replacement of a part of a building using modern materials may give an apparent element of improvement because of the greater durability, superior qualities and so forth of the new material. But the cost normally remains revenue expenditure where any improvement arises only because the customer uses new materials that are broadly equivalent to the old materials'
If someone was paying for my advice, it would be on balance, that's a repair, but if you feel different, carry on. The answer isn't black or white.
ziontrain said:
Interesting thought, given that HMRC specifically allow replacement of single glazing with double glazing as a revenue rather than capital expense (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim46925), and also specifically prohibit the deduction of any expense which would have been allowable as a revenue expense as a capital expense (https://www.gov.uk/hmrc-internal-manuals/capital-gains-manual/cg14300).
Other than that, I agree
I don’t think we are disagreeing.Other than that, I agree
If the property was a rented property, then the cost of replacing the windows could have been offset against rental income. If that was the case, then that cost would not be available for offset in the CGT calculations.
If the property was NOT a rental property, then the window replacement costs should be available for use in the CGT computations.
Not all second properties are rental properties.
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