CGT on sale of maisonette

[syderapple]

My partner bought his maisonette for £24500 in Oct 1984 and lived there until Nov 1999 when he purchased another property. My daughter lived in the flat from then until May 2003. The rent was not declared - what should he do about this ? If he now sells the house , for say £100000, how much capital gains tax would he incur?

Also when you sell a property how do you actually declare the CGT - do you just ask for a tax return and complete the relevant figures and then they work out how much you owe?

[Nigel Lord]

syderapple

The rental income should have been declared on your partner's tax returns, and he would be liable to interest and penalties.

A taxpayer is responsible for notifying the Inland Revenue of new sources of income and chargeable gains. If this is done in writing, the Revenue will issue a Self Assessment return. It would immediately become apparent that an income source had not been declared.

Roughly, the tax liability on the maisonette would be as follows (if the property was sold in September 2003) (sorry - no formatting tool):

Proceeds 100,000
Less:
Cost (24,500)
Indexation(0.793) (19,436)

56,063
PPR relief
(218/228) (53,605)

2,458

Residential
lettings relief (2,458)

Net gain Nil

As there would potentially be a further £37,542 of residential lettings relief, 20% taper relief and unused annual exemptions (£7,900 pa) available, it would be a long time before a chargeable gain arose.

If you require any further assistance please do not hesitate to contact us, and we will be happy to act on your behalf.

Nigel Lord
Lord Associates
Taxation & Business Consultants
Caxton House
Old Station Road
Loughton
Essex, IG10 4PE
020 8418 9101 & 07769 931852
mail@lordassociates.co.uk

[Ian McTernan CTA]

Your partner needs to make a voluntary declaration of the rental income and expenses (and have proof of any expenses!). Once everything is taken into account, there may not be much of a profit on which tax will be payable.

This needs to be done well in advance of contacting the Revenue and asking for a Return for the gain to be declared, as if they ask about rental income first, it ceases to be a voluntary declaration.

I would be happy to assist in this matter.

Ian McTernan CTA
McTernan Associates
Chartered Tax Advisers
ian@imcternan.com