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Where Taxpayers and Advisers Meet

gain on a flat that was second residence

ANDRE1717
Posts:18
Joined:Wed Aug 06, 2008 3:44 pm

Postby ANDRE1717 » Wed Oct 18, 2006 6:16 am

Hi there .I bought a flat in oct 2001 for 134000
and sold it for 165000 in 22nd april 05.it was bought for my use when i seperated from my wife witha mortgage. i did not tell anyone like the tax people i was living apart. i am now back with the wife in the main residence.the profit after all costs involved with the sale and purchase was 23967 . I declared this profit to the tax man on the 05/06 return. should i be paying tax in the difference of 23967 and the annual 8800? or were there allowances etc to avoid the tax please ? thanks

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Postby Peter D » Wed Oct 18, 2006 7:40 am

Did you live in the other house and have all your bills and the like delivered there, rates, elec, phone etc. Why did you tell the Tax man without taking advice. If you genuinely lived at the flat then there is no Tax Income Tax or CGT. Perhaps you have not told us the complete scenario. Regards Peter

Instinctive
Posts:1797
Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Wed Oct 18, 2006 8:14 am

The starting point is that a husband and wife or civil partners who are living together can have only one only or main residence between them, TCGA92/S222 (6).

However, once you separate, you are each entitled to your own exempt residence. You do not have to be formally separated - it is sufficient that the circumstances are such that the separation is likely to be permanent.

The small complication in your case is that you and your wife are back together again.

Depending on the exact circumstances of your separation and getting together again, it is possible that the property referred to in your query should be treated as your main residence and all gains thereon exempted due to PPR relief.

There is also the small Taper Relief due of 5% of the gain which you have not taken into account.

Ramnik

ANDRE1717
Posts:18
Joined:Wed Aug 06, 2008 3:44 pm

Postby ANDRE1717 » Wed Oct 18, 2006 9:27 am

HI Peter D . I visited the wife and kids at weekends at main res. I paid all the bills for both --so bills at flat in my name inc reduced council tax bills. then got back with family .
Thank you for the answer Instinctive. i was told by a friend to delare the profit which I was able to offest against a load of old share losses so thought I would be honest. I never got any paperwork back from the IR about the accruing outstanding cap gains and the hefty loss I still have to use for another day. I wasnt arware there was any taper releif so maybe iI can check into that. As I said i only got a self assessment statement but no mention of the cap gains on it. I wrote them a letter with my return outlining the gain on the flat and also that i had invested in a vct. I didnt get the relief on that as they ignored it ! they are now relooking at my letter in that respect .

al_eebee
Posts:899
Joined:Wed Aug 06, 2008 3:40 pm

Postby al_eebee » Wed Oct 18, 2006 11:48 pm

Andre

Losses come off before taper relief, so that will not help you.

Quite probably if you had other losses to offset that reduced the gain to the annual exemption nothing would have appeared on your SA statement

Instinctive
Posts:1797
Joined:Wed Aug 06, 2008 3:15 pm

Postby Instinctive » Thu Oct 19, 2006 2:43 am

Under self-assessment, you are not likely to hear from the tax office one way or the other unless they want to enquire or investigate your tax return.

I suggest that you consider whether you qualify for PPR relief on the house as your main residence on the basis that you were separated in circumstances which could result in the separation becoming permanent.

If so, you should file an amendment to your tax return. Make sure that you make full disclosure so that you are not accused of dishonesty.

This will leave you with your losses free to be used in the future.

Ramnik

Peter D
Posts:10668
Joined:Wed Aug 06, 2008 3:37 pm

Postby Peter D » Thu Oct 19, 2006 7:26 am

Andre, With the council tax for oone person and all the flats bills being addressed to you at the flat for the best part of 4 years then I think you have a good case for PPR. I'm afraid your friend sent you in the wrong direction. I also assmue the houses are in the same area and that you did not spend all weekend at the family home, just made daytime visits. Regards Peter

ANDRE1717
Posts:18
Joined:Wed Aug 06, 2008 3:44 pm

Postby ANDRE1717 » Fri Oct 20, 2006 4:18 am

Thanks peter D and instinctive for your help-much appreciated


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