CGT on sale of former parents home

[brynos]

Hi,
I am trying to asses the likely CGT that will be charged on the sale of my late parents home. The details are as follows.

The house was originally purchased in April 1987 with three owners registered as Joint Tenants they being myself and both my parents. Both my parents were retired and in their 70's. The date is potentially significant as Private Residents Relief (PRR) may be available to me.

My first parent died in December 1999 so the ownership automatically transferred to myself and my surviving parent.

The remaining parent died in November 2015 so the ownership automatically transferred to myself.

In December 2011 my surviving parent was discharged from hospital following a short illness, she was unable at that time to care for herself so she moved to my home on an original plan for it to be a convalescent period. As time went by, it became quite clear that she could not return to her home so it remained empty until her death in 2015.

I tried to sell the property in 2016 but due to the fact it needed substantial refurbishment it did not sell so at the end of 2016 I fully refurbished the property spending over £30k. The property was then let in 2017 and has remained let out to this date. The rental income has been reported to HMRC since it was let out so there is no need to comment on that.

So specifically, I am looking for information on whether in the circumstances PRR will be available to me and on what basis/percentage of ownership/applicable dates it will apply, and therefore the the method of calculating CGT

IF PRR is not available, then how do I go about calculating what CGT will be charged taking all of the above into account.

Many thanks for any help

[bd6759]

You don’t get PPR.

Your base cost is the total of:
1987: 1/3 of the purchase price
1999: 1/6 of the value
2015: 1/2 of the value

You can add to this the cost of enhancing the property.

[brynos]

Can you explain why PRR does not apply as the purchase was 12 months prior to the rules changing on the purchase of property for a dependant relative?

[pawncob]

You didn't mention your parents' ages or DRR.
Do you qualify?
https://www.accountingweb.co.uk/tax/business-tax/dependent-relatives-and-ppr-letting-relief-by-nichola-ross-martin

[bd6759]

I’m sorry. For some reason it was in the back of my mind that the relief was withdrawn in 1984.

PPR could be due. The amount of relief Is calculated as a proportion of the period of ownership. You calculate the gain as normal, then deduct the proportion (in months) that the property was occupied by the dependent relative. In your case that will be April 1987 to December 2011.

[brynos]

OK this is a great forum and resource and thank you to bd6759 and pawncob for your replies.

So if I read both of your responses correctly, then the following is the case.

Parents were born in 1914 and 1920 so both at the time fit the classification of dependent by reason of age. Therefore PRR applies.

I calculate the gain based on the percentage of ownership at the appropriate dates as given in the first reply, adding in any capital refurb costs during the ownership.
The property is owned from April 1987 to say April 2022 or 35 years or 400 months. the period of occupation is April 1987 to December 2011 or 298 months. Therefore the amount of relief is 298/400 of the sum calculated.
Just to be clear can someone confirm that because there was a change in the percentage ownership on the death of the first parent, then it does not affect the fact that PRR continues to be available, or the way it is calculated, during the occupation of the surviving parent.

Then according to the article referenced by pawncob where a property, and this was a surprise, has had PRR applied against a capital gain then Letting relief is also available on that gain so I can also apply that relief to the remaining chargeable gain once I have figured out the calculations.

Finally I apply the annual CGT allowance to the remaining balance and calculate CGT on the remainder at the appropriate percentage. I expect if the above is the case, then the net result will be zero CGT, not what I expected but great news if correct.

Any comments? and thanks in advance.

[bd6759]

Letting relief has been withdrawn.

But you can add 9 months final period of ownership to your 298 months.