Tax Return - Wife's flat - Capital Gains Tax?
Discussion
Folks,
Apologies, I know this is real 11th hour stuff before the 31st cutoff, but I need to do my Wifes tax return this next couple of evenings. Every year I swear we'll get an accountant to handle it, and every year it ends up on my desk!
Up until TY 07-08, it was *fairly* straightforward, but this year I find myself in a bit of a quandry....I'll try to bullet-point it for clarity.
1) Wife and I met in 2003 - She was renting and living in a council flat, I had my own house (mortgaged)
2) She had "Right To Buy" in (iirc) Feb/March 2004, and did indeed start buying (and continued living there)
3) She moved down to my house in Kent in Sept 2004. My house was, and still is, in my name on the mortgage paperwork.
4) Wifes flat was then rented out, more or less continually (a couple of weeks break in between tenants) for the next 3yrs, when we then sold it in Aug/Sept 2007.
5) We married in April 2005 (if that's relevant?)
Now, my thinking is, is that this has been the only property my Wife has ever bought or owned. She was resident in the flat until Sept 2004. This hasn't been a joint property (i.e., I've had no financial interest in the flat).
Do we need to declare this as Capital Gains?...the HMRC help sheets would suggest that we do.
Any help gratefully received!
Cheers
Spenny_B
Apologies, I know this is real 11th hour stuff before the 31st cutoff, but I need to do my Wifes tax return this next couple of evenings. Every year I swear we'll get an accountant to handle it, and every year it ends up on my desk!
Up until TY 07-08, it was *fairly* straightforward, but this year I find myself in a bit of a quandry....I'll try to bullet-point it for clarity.
1) Wife and I met in 2003 - She was renting and living in a council flat, I had my own house (mortgaged)
2) She had "Right To Buy" in (iirc) Feb/March 2004, and did indeed start buying (and continued living there)
3) She moved down to my house in Kent in Sept 2004. My house was, and still is, in my name on the mortgage paperwork.
4) Wifes flat was then rented out, more or less continually (a couple of weeks break in between tenants) for the next 3yrs, when we then sold it in Aug/Sept 2007.
5) We married in April 2005 (if that's relevant?)
Now, my thinking is, is that this has been the only property my Wife has ever bought or owned. She was resident in the flat until Sept 2004. This hasn't been a joint property (i.e., I've had no financial interest in the flat).
Do we need to declare this as Capital Gains?...the HMRC help sheets would suggest that we do.
Any help gratefully received!
Cheers
Spenny_B
Yes, although she gets a 3 year additional CGT allowance for it having been her main residence, so effectively CGT will apply only from Sep 2007 I think. As you are married you should be able to pool your allowances (assuming you haven't used yours), but an accountant will be better at the ins and outs of it. Sure Eric will be along shortly.
The simple answer is yes - you have to declare this as a capital gain, but it sounds as though you're eligible to claim Private Residence Relief (PPR) on the gain.
HM Revenue & Customs Help Sheet 283 gives details, but basically when you buy a house and live in it for a while (i.e. it's your main residence) you automatically get PPR for the first 36 months and the last 36 months. Any gain on the disposal is then split between the period attributable to PPR (minimum 72 months) and the period attributable to letting.
As long as the gain attributable to the letting period is less than your annual allowance (£9200) all you have to put in your Tax Return are the proceeds from the sale, the allowable costs (i.e. purchase price) and the fact that you are making a claim and that the gain is covered by PPR and/or annual allowance. To avoid any questions from HMRC later it's possibly worth putting in some extra details in the 'other information', but that's a personal choice!
HM Revenue & Customs Help Sheet 283 gives details, but basically when you buy a house and live in it for a while (i.e. it's your main residence) you automatically get PPR for the first 36 months and the last 36 months. Any gain on the disposal is then split between the period attributable to PPR (minimum 72 months) and the period attributable to letting.
As long as the gain attributable to the letting period is less than your annual allowance (£9200) all you have to put in your Tax Return are the proceeds from the sale, the allowable costs (i.e. purchase price) and the fact that you are making a claim and that the gain is covered by PPR and/or annual allowance. To avoid any questions from HMRC later it's possibly worth putting in some extra details in the 'other information', but that's a personal choice!
Thanks guys really appreciate the help. I think I'm with you....
So in our case, because she had the flat from (say) Feb 2004 through to (say) Sept 2007, a period of 43 months, we should come under the PPR umbrella entirely?
Conversely, as a worked example, *if* she bought the flat in Feb 2000 through to Sept 2007, a period of 91 months, then from Feb 2000 -> Feb 2003 would be PPR (36mths), plus the period from Sept 2004 -> Sept 2007 would also be PPR (another 36mths), the bit inbetween, 19mths, would then be "attributable to letting"?
(And then it would of course be a case of whether the "attributable to letting" bit is less that £9,200p.a.....)
Am downloading the Help Sheet (283) as we speak!
Cheers
S
So in our case, because she had the flat from (say) Feb 2004 through to (say) Sept 2007, a period of 43 months, we should come under the PPR umbrella entirely?
Conversely, as a worked example, *if* she bought the flat in Feb 2000 through to Sept 2007, a period of 91 months, then from Feb 2000 -> Feb 2003 would be PPR (36mths), plus the period from Sept 2004 -> Sept 2007 would also be PPR (another 36mths), the bit inbetween, 19mths, would then be "attributable to letting"?
(And then it would of course be a case of whether the "attributable to letting" bit is less that £9,200p.a.....)
Am downloading the Help Sheet (283) as we speak!
Cheers
S
Just to re-iterate the above, you have the final 36 months of ownership of a property that has been your PPR at any time (which the house was for your wife without a doubt based on your bullet points).
Therefore as long as you did sell up within 36 months of the Mrs moving out of PPR and in with you (which again it seems that Sept 04 - Aug 07 fits perfectly for you) then no CGT due. Are you sure you are not a Tax Accountant as this is great planning - or was it simply excellent luck??
IMHO, it doesn't need even reporting on your (wife's) Tax Return.
Therefore as long as you did sell up within 36 months of the Mrs moving out of PPR and in with you (which again it seems that Sept 04 - Aug 07 fits perfectly for you) then no CGT due. Are you sure you are not a Tax Accountant as this is great planning - or was it simply excellent luck??
IMHO, it doesn't need even reporting on your (wife's) Tax Return.
spenny_b said:
Again, thanks for all the help guys - It all did make sense (kind of) but I did get in a complete muddle when coming to actually filling in the online forms. Thankfully a golfing buddy of my Brothers is a retired accountant that took pity and talked me through on the blower!
S
Do not forget your CGT computation sheet.S
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