CGT Calculation on loss (adjusting period while landlord lived and property vacant)

[paulr101]

Hi,

My friend bought a flat is Scotland in January, 2009 and lived there for 3 years. When he moved to England in January, 2013 he started to rent it out.
Tenants moved out in June, 2021 and he sold the flat in March, 2022 for a loss of nearly £25,000.

After the tenants moved out from the property it was available for rent, but he could not find anyone, so he sold it in March, 2022 (property was empty for 9 months).

When the tax advisor prepared the CGT, he said my friend cannot carry forward the entire loss. He has to restrict the carry forward amount for the days my friend lived in the property and also for the period when the property was vacant before sale.

That means he can carry forward only the loss from January, 2013 to June, 2021 (when tenants moved out).
He cannot use the period before Jan, 2013 as he was living in the property. He cannot use the period between June, 2021 (tenants moved out) - March, 2022 (sale date).
Property was empty, my friend (landlord) was not living in the property and he was still a registered landlord in Scotland.

I was wondering whether this assumption is correct or not.

For example
Mr. X owned a property for 100 days and sold it on the 100th day for a loss of £1000.

Out of 100 days the first 10 days he lived and then he moved out and rented it out.

He sold it on the 100th day. Unfortunately, in the last 5 days before the sale he could not find a tenant to rent it.

So, when he calculates his CGT, his carry forward loss will be restricted like -

Calculation
===========
100 days - 10 days (Mr. X lived in the property) - 5 (last days before sale, Mr. X could not find tenant)= 85 days or 85%.
So his loss of £1000 will be adjust to 85% which £850 will be his carry forward loss.

I was wondering whether this calculation is correct.

Thanks,

[someone]

It sounds approximately correct.

Because it was his PPR at some point during the ownership, the loss(or gain if he had one) has to be restricted to the proportion that it was NOT his PPR.

The proportion for PRR is the period of occupation as PPR plus the last 9 months if they're not already covered by the period of occupation.

So in your friends case he owned the property for 13 years and 3 months. (159 months)

He gets PRR for the first 4 years (48 months) plus the last 9 months (total 57 months)

So his loss is restricted to (159-57)/(159) = 64%


I'm not sure if your dates are incorrect. You say he "lived there for 3 years" but "he moved to England in Jan 2013". Jan 2009 to Jan 2013 is four years.

If the property was empty from Jan 2012 - Jan 2013 but available for rent then that would change the proportion to:
(159-45)/159 = 72%

[paulr101]

Hi,
Thank you so much for the reply.
It was 4 years, not 3 years from Jan, 2009 - Jan, 2013. Sorry it is my mistake. He lived in the entire 4 years in the property.

After he moved to England in Jan, 2013, he did not go back to Scotland. Property was managed by his letting agency.
After tenant moved out in June, 2021, property was available for the entire remaining 9 months for both rent (also he was looking for good deals to sell it).
As he could not find any tenant, he decided to sell it in March, 2022.

Do we need to restrict the loss for the last 9 months as well? Property was not his primary residence during that period, he had another property and job in England at that time.
Property was available for rent and he was a registered landlord in Scotland at that time.

I was wondering whether it should it be (159-48)/(159) = 69.81% or should it be (159-57)/(159) = 64% .

Thanks

[someone]

AFAIAA you have to include the last 9 months. Just be thankful that it's not 36 months (which it used to be)

[paulr101]

Thank you so much, so we will go for the calculation - (159-57)/(159) = 64% which includes the last 9 months as well. So, he can carry forward 64% of his loss.
Sorry, I did not understand about the 36months you mentioned. I was wondering whether there is any document by HMRC or somebody which explains these things.
Thanks

[someone]

LMGTFY

https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2020#calculating-the-gain-where-only-partial-relief-is-due

This is 2020 - so it says 18 months at the end. The current figure is 9 months. It also talks about letting relief - which does not exist any more!

you have not always lived in your home, other than allowed periods of absence, multiply the total gain by the fraction equal to the period you actually lived in the dwelling house plus any allowed periods of absence plus any part of the final 18 months not covered by actual occupation or allowed period of absence, divided by the period of ownership - that part of the gain will be exempt

[paulr101]

Thank you for sending the link.
I was wondering whether these rules and calculations are applicable when you make a loss.
The advisor told my friend the rules are same whether you make profit or loss. My friend thought he can carry forward the entire loss in his Self Assessment.
Thanks

[someone]

The rules are the same - or rather there is only one rule. It doesn't distinguish between profit and loss.

[paulr101]

Thank you so much for your help.