PPR and Lettings relief on sale of ex-council flat

[leo038]

Could someone advise me if me and my wife (joint owners) can claim PPR and lettings relief if we lived in the property for 6 months prior to letting it out?
We moved in the flat as Local Authority tenants in June 1998 and bought the flat from the same LA under the Right to Buy on 12/05/2003.
We continue living there until 01/12/2003 when we decided to let the flat.

I will also include our earnings in 2015/16 in case it will help someone give us a rough estimate how much our CGT bill is going to be:
My income in 2015/16: £28000
My wifes's income in 2015/16: £ 11000

Date of Purchase: 12/05/2003
Moving out date: 01/12/2003
Let period: 01/12/2003 to 27/06/2015

Purchase Price: £ 107000
Purchase costs: £ 3317.00 (legal, stamp duty, costs of some capital works we had to pay LA in advance)

Sale price: £ 395000
Sale costs: £ 28089.00 (legal, estate agents fee and a large capital works bill to LA)

Thank you

[Peter D]

Read The T and C's about letting the property out. Often you have to live there 3 years before change of use.
What was the large capital bill for and have you got the numbers right. Regards Peter

[leo038]

Hi Peter,
Thank you for your post.

- I had permission from the freeholder (LA) to let the property so I don't think there's an issue with that.
- The capital works bill relates to extensive works to the inside and outside of the building (a tower block) and included: double glazed windows, replacement of lifts, gas and water pipes, electricity wiring (communal areas and tenanted flats only), building insulation etc, basically a total revamp. This changed the building completely and increased the value of the flat. It was a huge project which costed a lot of money and we (leaseholders) has to pay our share.
- The figures I supplied are correct

[Peter D]

Assuming you owned the property jointly the the CGT looks like this:

Purchase 107,000 12/05/2003
Disposal 395,000 27/06/2015
Total Gain 256,594
PRR 42,471 24 145
Capital Gain 214,123
Lett Relief 42,471 Qual Days 3678
Net Gain 171,653
CG Allow 22,200
CGT 2,700 16,723
CGT 5,760 11,963

CGT Bill 37,147
This is only approximate as you have not supplied the date of sale of the property.
I also not you mention capital works twice.
Regards Peter

[Peter D]

I would also add that only living there for 6 months may cause HMRC to question your claim to PPR. Regards Peter

[leo038]

Peter, thank you so much for your help and advise.

Here's some more info:

1. Date of sale: 18/09/2015
2. I had to pay my share of the costs for some capital works at the time of purchase and the other much larger bills for more recent works I paid from the sale proceeds.
3. Regarding PPR how would I go about proving to HMRC that we were living there for six months after purchase. I have lots of bills, bank statements and other correspondence but not sure what they actually prefer as evidence.
That was our home after all since June 1998 and we had no other property at that time. I lived there with my wife and two children. Why would HMRC challenge that?

[bd6759]

I don't see it as too much of a problem. It was your home for over five years, and you would not have had the right to buy if it was not your home.

What is surprising is that the council did not recoup some of the discount because you moved out so soon after exercising the right.