CGT On Let Property and Stamp Duty

by **Rogie** on Tue Jan 24, 2012 9:50 am

My husband and myself jointly bought a flat in September 2003, it was a council right to buy, and we had been renting the property for a few years prior to the purchase. We lived in it until December 2003 when we moved out of the area. We paid council tax up until the day we left. Our reason for leaving was because my husband had left his job through stress, and we couldn't afford to live there anymore.
The property has been let continuously since then, and we now wish to sell. The gain will be approximately £75,000.
We have been trying to work out what CGT exemptions we will qualify for, but have become confused when trying to calculate these and we would be very grateful for some help with this.
We are now separated, one of us is in rented accommodation, and the other still lives in the family home which we moved in to in December 2003. We are both still joint owners of both the family home and the flat.
If we put a new kitchen or bathroom into the flat before we sell it, can this cost be offset against CGT?
We also need to know how much stamp duty would be payable, is it just the purchaser who would pay this? We are debating whether to sell it in its current state for about £125,000, or to do it up, we need to take stamp duty into account when making this decision.
Many thanks.

by **King_Maker** on Tue Jan 24, 2012 9:59 am

SDLT (Stamp Duty Land Tax) is paid by the purchaser.

Have you read HMRC's Help Sheet HS283?

by **Peter D** on Tue Jan 24, 2012 10:13 am

It concerns me, as it would HMRC that you only lived there for 3 months yet you are going to claim the property as your PPR. Did you know that your husband was going to change direction when you purchased the property I need more information. I also need dates and values at purchase, and purchase costs, first rental date, void periods, sales value, disposal, sales and legal fees. With these I will run the numbers for you to see if there is any CGT liability. With PPR, if it qualifies, and Letting Relief there may be no CGT. Regards Peter

by **section 44** on Tue Jan 24, 2012 10:17 am

The buyer would pay SDLT at 1% if the purchase price exceeds £125k unless the buyer is a first time buyer or, provided that the purchase price does not exceed £150k, the property is located in a disadvantaged area.

by **Rogie** on Tue Jan 24, 2012 10:31 am

To King_Maker:
Thanks, yes, we've read it, and are not sure about a couple of things. We didn't know about being able to nominate a main residence within 2 years when we moved out of the flat, so we didn't do that.
Now we are separated, and we are not sure whether one of us can nominate the flat as his/her main residence as we are not actually living in the flat at the moment. I have read on the helpsheet you mentioned that if you are separated each of you can have a different only or main residence, do you have to be legally separated for this to apply? We are not legally separated as far as we know, we don't really know what this entails either.
I have been renting since September last year, does this count as a change in our combination of residences, when the 2 years would apply again in terms of being able to nominate your main residence, or would that only apply to properties you own?
As our period of residence at the flat was so short, would that be an issue with regard to the last 3 years rule and lettings relief. The flat was our only home until we moved out.
Sorry for so many questions,
Thanks very much.

by **King_Maker** on Tue Jan 24, 2012 10:50 am

Separation can complicate the CGT position.

You cannot nominate a (fully) rented out flat as a main residence, as you cannot reside in it.

Peter D has hit the nail on the head - does it qualify as a PPR. I think he may have overlooked the fact that it was your home for a few years before purchase.

by **Peter D** on Tue Jan 24, 2012 10:53 am

Re-Read my last post and answer all the questions. PPR is a matter of fact and when you purchase a new home that became your PPR. No nomination is required or in fact valid. Did you buy the flat with a residential mortgage and later convert it to a Buy to Let mortgage. Please explain it may effect your claim to PPR. Regards Peter

by **Peter D** on Tue Jan 24, 2012 10:58 am

Thanks King-Maker. Living in the property prior to purchase does not make there PPR as they were not owners during that period assuming this was a standard local authority tenancy. Regards Peter

by **King_Maker** on Tue Jan 24, 2012 11:08 am

Peter D wrote:Thanks King-Maker. Living in the property prior to purchase does not make there PPR as they were not owners during that period assuming this was a standard local authority tenancy. Regards Peter

I did not use the phrase PPR, but home, on purpose. It does put the 3 months occupation in a more advantageous context, IMHO.

by **Rogie** on Tue Jan 24, 2012 11:17 am

To Peter D,
We're not sure if we are going to be claiming PPR, we don't really understand what all this entails yet to be honest. We didn't know that he would be leaving his job when we made the decision to buy the flat, the right to buy process began in the spring of 2003 if I remember correctly, and from memory the purchase completed some time in September. He also left work in September, and didn't work at all for the rest of that year. We bought our new house in the September 2003 as well, it was much cheaper than the flat and needed doing up, we bought it without a mortgage by capital raising on the flat, and we also had some financial help from relatives. Once my husband had left work, we couldn't afford the mortgage payments on the flat.
We didn't have time to sell the flat, and were also tied in to a 3 year period where if we sold we would have to pay back the discount under the right to buy rules, so letting was the only option at the time.
The price we paid was £52,000 in September 2003, the purchase costs were low, from memory we only had to pay the solicitors fees, and I don't have a record of those here, I think they were about £800. The first rental date was December 2003, there have been no voids, the sales value is uncertain but estimated to be £125,000 in it's present condition, we don't know the sales and legal fees yet as we haven't had time to check these out yet, could you do a rough calculation showing an example of say £5000 so that we could see how this would work?
Yes Peter, we did purchase with a residential mortgage, and we later changed to a buy to let. When it was a residential we had to pay an extra 1% to our lender to get permission to let. It was a standard local authority tenancy.