CGT On Let Property and Stamp Duty

[Rogie]

Does the amount of the mortgage affect CGT in any way, we have remortgaged the flat since we bought it, when we changed it to a buy to let.

[section 44]

no

[King_Maker]

Does the amount of the mortgage affect CGT in any way, we have remortgaged the flat since we bought it, when we changed it to a buy to let.

Unfortunately not.

Quite a few re-mortgaged BTL owners are discovering that the sale proceeds can be less than the CGT due.

[Rogie]

Yes, but we still don't know whether we will qualify for any exemptions yet.

[Peter D]

From what you have said in appears to have been your intention to make it your permanent residence so it will qualify for PPR. much to your advantage. Slighty dodgy that you purchased the new house at the same time that you completed on the council flat, can you provide the exact dates of both exchanges of contract. However let's proceed with the PPR approach and assume you left the flat in Decemeber. Please confirm the date you left and that you were joint owners. I assume the 52,000 was the discounted price not the open market value.

Purchase 52000 14/09/2003
Disposal 125,000 14/06/2012
Total Gain 72,200
PRR 26,130 38 105
Capital Gain 46,070
Lett Relief 26,130 Qual Days 2011
Net Gain 19,941
CG Allow 21,200
CGT 18% 0 0
CGT 28% 0 0

CGT Bill 0

With PPR you loose the relief and the letting relief. So the lowest bill would be :

Purchase 52000 14/09/2003
Disposal 125,000 14/06/2012
Total Gain 72,200
PRR 0 0 105
Capital Gain 72,200
Lett Relief 0 Qual Days 0
Net Gain 72,200
CG Allow 21,200
CGT 18% 4,590 4,590
CGT 28% 0 0

CGT Bill 9,180 This bill be depend on your normal gross income in the FY of disposal

How far apart are the two properties, I am looking for reasons to support your PPR (PRR) as it effect your CGT a lot as you can now see.

Regards Peter

[Rogie]

Hi Peter,
I don't have those exact 2 dates here, but I will try to get hold of them later today and let you know. Going on memory alone both purchases were in September, we did leave the flat in December, and we have always been joint owners. £52,000 was indeed the discounted price.
I don't understand what these figures represent in your first example: 26 130 38 105, and why the calculation would be reduced to £46,070. I also don't understand how you have calculated lettings relief. I understand that we each have an annual allowance however of £10,600.
There is another point relating to our original intention to make the flat our home, we had to wait for a qualifying period of time to elapse under the right to buy rules, before we could buy at a discount. I believe without checking the dates we bought the flat at pretty much the earliest opportunity, hence why we couldn't buy it any sooner. A period of 3 years elapsed between moving in to the flat and buying it.
With regard to example 2, if we were liable to pay CGT, neither of us are currently tax payers, so what would happen under those circumstances?
Do you think we might not have a strong enough case to claim PRR?
Thanks.

[Peter D]

Was the September date for your council flat the completion date or the exchange of contract date, this is important as the the exchange of contract date on your new flat.
the 26,130 38 105 is the relief gained from the PPR ratio. Due to me using mid months dates the calculation has only granted you two full months or residence over the ownership period of 105 whole months If I work it out in whole days, if I had the exact dates then it would most probably be more like 3 months plus your 36 months rule as per HS283. The result of the ratio is a relief of 26,130 this relief is deducted form the gain thus 40,070.
Letting relief is the gross gain divided by the number of whole days owned times the number of days actually let but not including the last 36 months as those are already relieved.
Without all the facts I can not tell you how strong your case is. Please try and answer all the questions including how far the properties are away from each other ?
The figures I provided assumed that you have no other income including any pensions.
Please come back with the answers. Regards Peter

[Rogie]

I have looked all the information up, completion of the council flat was 01/09/03, and it appears that the exchange of contracts took place on the same date, although I would need to confirm this with my solicitor. Completion of the house took place on 24/09/03, and it also appears that exchange of contracts happened on the same day, and likewise I would have to get this confirmed. The house was vacant when we bought it and was not in a chain. We vacated the property on 07/12/03, and commenced letting on 08/12/03. The properties are 300 miles apart.