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Where Taxpayers and Advisers Meet

CGT and DofT conundrum

Joined:Wed Aug 06, 2008 3:44 pm
CGT and DofT conundrum

Postby snoogo » Tue Jan 26, 2021 12:54 pm

I have a flat in London I am looking to sell but the CGT is baffling me, any help appreciated:

-Flat bought March 1996 for £75,000 Lived in as primary residence for 4 years (rented a room/flatshare for 3 years).
-Moved out in 2001 and rented it out ever since.
-Looking to sell now for £500,000 (I know, I should be happy!)

my calculations:
taxable gain = £390,000 (sale-purchase price minus Estate agency sales fee £10,000 and Lease extension fees £25,000)
So Private Residents relief is 48+9/288 so 19.8% of £390k = £77,187 which leaves CGT liability of £312,813 (minus CGT allowance £12,300 gives £300,513). I'm higher rate payer so 28% tax is £84,143 due within 30 days of sale!

I did spend approx £50,000 major renovations when I first bought the flat BUT I DONT HAVE RECEIPTS, and the bank cant give me bank records pre 2000.

I have two main questions:
1. Can I claim reasonable renovation costs without receipts, as this would make a big difference
2. If I get a Declaration of Trust to my wife, we both get the CGT allowance, (so £24,600 off £312,813) - but how does that affect all the cost calculations, PRR etc - can she claim the PRR or do I only get the PRR on half the CGT liability? Will she end up paying more tax with no PRR/costs?

I'm going round in circles trying to work out most efficient way for us to go forward.

(also one quick question - do you claim PRR first or take it off after costs?)

Joined:Wed Aug 06, 2008 3:25 pm

Re: CGT and DofT conundrum

Postby maths » Tue Jan 26, 2021 9:32 pm

By executing a DoT (for say 50% of property) the disposal to your wife means her base cost for CGT at the time of transfer is equal to your original cost of acquisition plus subsequent allowable costs up to date of transfer. In addition any period you occupied as a main residence prior to the transfer is also issued to have been wife's main residence.

Ideally you need to be able top prove costs of renovation; in any event it may be not all such costs are allowable for CGT.

No lettings relief available and last 9 months only of ownership will be treated as main residence.

Joined:Wed Aug 06, 2008 3:44 pm

Re: CGT and DofT conundrum

Postby snoogo » Tue Jan 26, 2021 10:36 pm

Thanks for that, Maths
So to clarify, my wife gets to claim the PRR as well even though she's never lived there?
So then the PRR would equate to 48+9/288 (or 19.8%) of £195,000 for both/each of us instead of the £390,000 all on me?

My wife is basic rate tax, I am higher so that would mean the Declaration of Trust would work better if she had the majority share, say 90:10?

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