Help with CGT calculation

[kc1]

Hi,

Iv'e read a lot about CGT on the sale of a second property, but I'm a little confused about the calculation.

Situation (numbers rounded):

Bought a flat 15 years ago in 1996 for £150k
Sale, if it goes ahead will be for £775k
I lived in it with wife for 7 years, and have rented since i.e. 8 years

Am I right in thinking the first 3 years of ownership and the last year are not taxable?, or is it the first three years of the rental period?

So is the calculation for the gain before allowances: ((sale price minus purchase price) divided by 15) multiplied by (15-3-1)? i.e. (£625k/15) x 11 = ~£458k?

Or is the gain compounded?

Or should I attempt to calculate the gain in each given year based on RPI?


I'm also a little confused about the allowances.

Are we eligible for Letting Relief, or is this only if the flat was our primary home in the last year (which we would struggle to demonstrate if it requires utilities and mail to have been directed there)?

We have made a loss on the rental each year because of the mortgage interest and amount of repairs and maintenance we have included in the rental costs. Is this loss carried forward deductible from the CGT payable?

I understand things like costs can be included associated with buying and selling costs, like Stamp Duty, legal fees as well as improvement costs and dates, but...

Are professional fees associated with the rental allowable - i.e. Inventory Clerk, Estate Agent Commission, etc.?

I read in one place that cost of "any services provided e.g. laundry, gardening and porter can be included" is that right?

Also,
- ground rents?
- mortgage interest?

I've also read that "expenses in connection with the first letting of a property for more than one year" are not allowed - can anybody confirm?

Thanks very much in advance

[Peter D]

I'll run the numbers for you but without at least the dates being MM/YYYY.
Ids the property jointy owned ( on the deeds ) what are you individual 'normal incomes' in the FY of disposal. The properrty is exempt form CGT for the actaull period you lived there and the last 36 months. Read HS283.
Give me 'all' the facts and I'll run the numbers. Regards Peter

[kc1]

Thanks for your reply Peter,

Let's say:
- purchased 20 Sep 1996
- left 20 Sep 2003
- sold 20 Sep 2011

Property is jointly owned

Income will be £7,475 salary plus dividends approximately £70k each (we're both directors of the same ltd. co.)

The properrty is exempt form CGT for the actaul period you lived there and the last

OK, so gain before allowances is (8 years - 1) x £41k?

Read HS283.

Yes, but it says...

the dwelling house has been your only or main residence throughout your period of ownership"

...which is why I thought Letting Relief was not applicable - is that right?

Thanks

[Peter D]

You have not provided the rental dates but here are the numbers based and what you have provided :

Purchase 150000 20/09/1996
Disposal 775,000 20/09/2011
Total Gain 625,000
PRR 415,503 119 179
Capital Gain 209,497
Lett Relief 80,000 Qual Days 1826
Net Gain 129,497
CG Allow 21,200
CGT 18% 0 0
CGT 28% 15,162 15,162

CGT Bill 30,323 Total

Regards Peter

[kc1]

Thanks Peter,

Rental was from 20 Sep 2003 to date (say 20 Sep 2011)

But surely Letting Relief does not apply (see above)?

PRR 415,503 119 179

What is "119 179"?

Do you have a view on the other allowances, as in the original post?

Thanks

[Stevebl]

Your quote from 283 refers to 100% exemption on basis that the property was your principal private residence throughout the entire period of ownership. See page 6 and example 8 of same publication for more details of letting relief. This will apply in this circumstance.

[kc1]

Your quote from 283 refers to 100% exemption on basis that the property was your principal private residence throughout the entire period of ownership. See page 6 and example 8 of same publication for more details of letting relief. This will apply in this circumstance.

Hmmm Page 6 also says...

If you only get partial relief because you have let some or all of your dwelling house as residential accommodation...

That's not the case is it? Because I am not getting partial [Private Residence ] relief at all.

In Example 8, the person is living in his home and letting some of it.

[Peter D]

If you lived in the property as your genuine home then LR applies.
You lived in the property for 83 whole months, 84 if you had moved out a day later ( calulation is 'whole' months or even whole days. ) plus 36( as per HS 283 ) over the total periob of ownership i.e. 179. this ratio apportions the PPR i.e.119/179 so a gain of £625,000 relieved by £415,503 leaves you with a net gain of £209,497.

Simple when you know how to do it. Regards Peter

[Peter D]

You lived in the house with your wife a joint owners as your genuine home, then you moved out and rented out the whole property. My figured based on this are valid, however I do doubt that everthing happened of the 20th of the month. Regards Peter

[kc1]

Oh, OK, Thanks

What about the other cost? Are they allowable deductions? i.e.
- loss carried forward on Self Assessment (~30k each)?
- professional fees associated with the rental allowable - i.e. Inventory Clerk, Estate Agent Commission, etc.?
- ground rents?
- mortgage interest?

...and the bit about "expenses in connection with the first letting of a property for more than one year" not being allowed - can anybody confirm?