HELP NEEDED!!!

[Sally.jones]

Hi everyone.

My husband and I are about to complete on our sale of our 2nd home, and CGT has got me in a right spin.

Trying to work out how much we would be liable to pay in C.G.T.

* House purchased for discounted price of £27,000 in 2011. Lived in it as our main residence for 4months.

* Fast forward 2021, house has been empty since Jan 2020, and now selling for £95,000 (value of £115,000 - wanted a quick sale)

Could anyone please help me work out how much CGT we will need to pay? The help sheets are not helping at all . I have read that we are entitled to PRR for the 4months living plus 9 months automatic?
Both of us are basic rate tax payer's.

Any help would be hugely appreciated!!

Thank you, Sally

[pawncob]

PPRR and and time apportionment are calculated on a monthly basis, so dates required.
Purchase and sale costs also required.

[Sally.jones]

Hello,

Thanks for responding.

Purchase £27k sale, £95k. This raises another question on the CGT return. We purchased via right to buy, so we can answer "yes, lower price to help buyer" but... the house was valued at £115k, however we accepted the 95k to a 1st time buyer for a quick sale. Would this mean we have sold at a lower price to help the buyer?

PRR - think this is ok now... 9month auto, plus 4 months living in. 13months /122 (ownership)x100 =10.65%??

Another question (sorry) as this is a joint sale, do i assume when completing the submission, I would half the sale/Purchase/fees between both parties?

Thank you so much for your help

[Jholm]

Hi Sally,

You can split all sale proceeds, costs, expenditure 50/50 (or other percentages) in line with the ownership. This will give you double the tax-free allowance, plus make extra use of lower tax rates (assuming you are not already both higher-rate taxpayers). See below, using 50% figures:

Proceeds: £47,500
Costs: (£13,500)
Gain: £34,000
PPR Relief: (£3,623)
Less: AE (£12,300)
Taxable: £18,077

CGT @ 18%/28%, depending on how much basic rate band you each have left.

This doesn't account for any other allowable costs, such as estate agent fees, legal costs etc. It also doesn't account for potential capital losses brought forward from earlier years.

HMRC may contest the PPR relief on the basis that 4 months (plus the 9 automatically granted as a result) isn't a long time for occupation. However, there is no rule as to the length of the occupation; more so they look at the quality of occupation and the surrounding facts.

The fact you sold at undervalue shouldn't be a concern, provided it is an 'arms-length' transaction. However, if the buyers and yourselves are deemed connected parties (for individuals this is generally close family without elaborating further), then the value is used in place of actual proceeds. In your instance, this would result in the gain for CGT purposes being £20k higher as a couple.

You will need to both complete a UK property return and pay the CGT within 30 days of the completion date.

Hope this helps.

[Sally.jones]

Thank you so much Jhlom. If only gov.uk would explain it as easy as you have! Both basic rate payers so expecting around £3300 each.

PRR - Not too concerned about HMRC querying the length. Genuine case of purchasing then deciding I wanted to "go home" so to speak.

Again, thank you for your help! This has caused no end of sleepless nights.

[Jholm]

No problem, all the best and sleep well!!!

[Sally.jones]

Sorry, me again.
I'm about to pay my CGT bill and am faced with the question, did I purchase the property for less than value as seller wanted to help me out... im assuming as this was a right to buy property and we received a discounted price, the answer to this would be yes?

Ie. Value £42,500 with discount purchased for £27,000 therefore we use the value amount when completing the CGT return?

Thank you again!

[pawncob]

https://www.taxationweb.co.uk/forum/right-to-buy-discount-and-capital-gains-t53892.html

[Sally.jones]

Thanks again Pawncob.

Seems conflicting advice as the answer to the question on the previous post would sugges that you state no to the reduced value?