Capital gains - main residence

Can anyone tell me if capital gains will be due if we sell my partner's house? Or which IR leaflets are applicable to calculate it myself?

Bought for 20k 1982 Sell 160k 2005

Lived in as main residence 1982 - 1996 Let for 6 years 1996 - 2002. Vacant 6 months 2002 Main residence 18 mths 2003 - 2004 Vacant/ repairs 14 months 2004 - present

TIA

John

Reply to
fotos
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IR283 IR87

Reply to
Daytona

Yes to both questions.

No CGT will be due.

IR283 describes private residence relief and lettings relief. SA108(Notes) describes taper relief and indexation allowance.

OK, here goes.

You have a basic raw gain of 140k. Deduct from this the expenses incurred both in the purchase and in the sale. This will be a few thousand. For simplicity, ignore this.

Deduct indexation allowance (which allows for inflation up to April

1998). The allowance equals the purchase price plus acquisition expenses, multiplied by a factor picked from a table depending on the month of purchase. For 1982, this factor is approximately 1.

Thus we have an indexed gain of about 120k.

You can probably count the 6 month vacancy as part of the letting. The 14 month vacancy counts as main residence due to the 36 month rule.

Total period of ownership approx 22 years of which 6.5 let and approx

15.5 count as main home. Therefore you'd get 15.5/22 * 120k private residence relief (84.5k) and 6.5/22 * 120k lettings relief (35.5k). Lettings relief is not reduced because it exceeds neither the PRR nor 40k. Your reliefs reduce your taxable gain to zero. Hence no need even to look at taper relief or worry about using your annual exemption.
Reply to
Ronald Raygun

From the figures, probably not, but I haven't actually done the calculations. However, you will need to declare it.

Reply to
Jonathan Bryce

But only if asked the question, surely? (no tax return => no need to say anything)

Reply to
Clifford Frisby

I am afraid not. Under Self Assessment, the onus is on the taxpayer to request a Tax Return where appropriate.

For 2003-04 onwards, for CGT, there is no need to report a Nil liability unless the consideration for all disposals (excluding exempt assets) exceeds

4x the Exemption limit for the year of disposal.
Reply to
Doug Ramage

I'm not one to take the Which? guides as gospel, but if it's wrong (or easily misunderstood) then a lot of people (me included) need to know.

It says: "If you receive a tax return, you'll have to complete the capital gains pages if: [list of bullets]. The capital gains pages aren't straightforward so read the Revenue's notes carefully. If you don't receive a tax return, you have to notify the Inland Revenue only if you have capital gains on which tax is due."

I'm pretty sure this is confirmed in one of the Revenue guides too (Probably the PRR one) but I'd need to check.

Reply to
Clifford Frisby

"Clifford Frisby" wrote

Ah, but when "a tax liability of Nil is due", then - according to the above - the IR may still need to be notified... [Tax *is* due, but the amount just happens to be zero (after reliefs).]

Reply to
Tim

Forgive me for being a bit sceptical here. I know there are subtle distinctions to be made between VAT-exempt and VAT-zero-rated, and I know that the 0% corporation tax band is not equivalent to a tax allowance. But I have never, ever, been made aware of a difference between 'tax not due' and 'tax of £0 due' in the personal tax regime. They sound pretty synonymous to me. If the distinction really exists then I doubt that it is a distinction which could be appreciated by the millions of personal tax payers who don't receive tax returns, who presumably have an obligation to understand the difference.

Nevertheless, if I go along with it for a moment, then you seem to be saying that the criterion for someone to use when deciding whether it is necessary to notify the revenue of a disposal(s) is NOT either of these: (a) my disposal proceeds exceeded 4 times the CG allowance, (b) I have >0 CG tax due on the disposal(s), in which case it must be something else.

What is that mysterious criterion?

I'm genuinely interested for practical purposes, not arguing for the sake of it.

Reply to
Clifford Frisby

"Clifford Frisby" wrote

No problem. I was merely pointing out that Doug's comment and your quote from 'Which?' are consistent (no conflict involved).

"Clifford Frisby" wrote

What about: (c) Notify them if EITHER tax exceeds zero, OR the disposal proceeds exceed

4x allowance... ...?
Reply to
Tim

You need to take into account a third one: (c) I am entitled to 100% private residence relief, because the property has been my main or only home throughout my ownership of it with the possible exception of the last three years.

Clearly, B and C cannot both be true, so there are three cases to consider:

C is true (and hence B false): You need not notify.

B is true (and hence C false): You must notify.

B and C are both false: This is the only time A matters, and we have two sub-cases:

A is false: You need not notify.

A is true: You must notify.

This last one is actually a silly rule, likely to be unenforceable because people cannot reasonably be expected to know about it, especially if they don't already receive a tax return.

Reply to
Ronald Raygun

In Revenue publication CGT1 for 2003/04, three possibilities are listed for why you would need to report your gains to the Revenue.

One of these only applies if you already have a tax return. Another concerns reporting or utilising losses, which is clearly a matter of choice.

That leaves one other, which is that you must make a report if you "have an amount chargeable to CGT". Elsewhere in CGT1, it is made clear that the "amount chargeable to CGT" is arrived at after deducting the annual exempt amount, which is the last step of the calculation.

Hence, I see no reason why the OP should make a report if he is satisfied that he does not have any CGT to pay.

Reply to
Clifford Frisby

"Clifford Frisby" wrote

But see "NOTES ON CAPITAL GAINS: PAGE CGN2" :-

"Fill in the Capital Gains Pages if: - you disposed of chargeable assets in the year to 5 April 2005 worth more than 32,800, or ..." ...

Reply to
Tim

It's not directly relevant what page CGN2 says, since this is not normally sent out with most people's tax returns.

Luckily, page 2 of the main tax return says the same at Q8, and page 7 of the main tax return guide repeats this advice and also refers you to leaflet IR283.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

OK, but anyone looking on the IR website could easily find the CGT Notes, as I just did!

"Ronald Raygun" wrote

Well, there's no excuse then (for not reporting).

Reply to
Tim

In message , Ronald Raygun writes

I think the various posters are confusing things.

IF you get a tax return then the 4 x allowance bit applies.

If you DONT get a return then you need only report if there is tax to pay.

Reply to
john boyle

"Clifford Frisby" wrote

"Clifford Frisby" wrote

That's unfortunate.

Note that the 'Which?' tax guide actually says (just before "If you don't receive a tax return" - in the same paragraph): "The capital gains pages aren't straightforward so READ THE REVENUE'S NOTES (SA108(Notes)) CAREFULLY."

If you *do* read those notes, then you'll see (p.2 as above) that you'd need to notify if gain exceeds 4x allowance (even if no tax to pay).

Reply to
Tim

Probably so, if you were a student of mathematical logic, but in the context of the overall thread it did sound as though Doug was at least hinting that the converse of his statement was also true, i.e. that if your disposal proceeds *are* in excess of 4xAEA then a report is required!

Well, this is (isn't it?) pretty much the question that decides whether you need to fill in the CGT pages *if* you receive a tax return, so it would at least have the virtue of equalising the misery for those that do recieve one and those that don't.

However, going back to the Which? guide, it makes a clear top-level distinction between those that do receive a tax return and those that don't, and describes reporting requirements which are less onerous for the second group compared with the first. (Because unless and until you have a tax return, the 4xAEA is of no concern - according to Which?)

So, if your (c) was indeed the correct criterion, it would surely mean that the Which? guide was either plain wrong or hopelessly misleading.

As it happens, I am currently convinced that Which? is correct because booklet CGT1 supports it (see replies elsewhere).

Reply to
Clifford Frisby

But CGN2 is part of the guides for filling in your tax return! It is not 'in scope' until you receive a tax return. CGT1 does not suffer from this disadvantage.

I am not disputing that the OP must fill the CG pages if he has been given notice to file a tax return. He will have no choice unless he chooses to ignore the instructions on it.

The argument concerns whether he has a more general duty to notify the Revenue of the disposal in the absence of a tax return, even though he has no CGT to cough up. Others seem to be saying that he does have a duty to notify (and this seems to be triggered by the size of the disposal proceeds). I content that he doesn't.

Reply to
Clifford Frisby

Agreed. But the discussion is predicated on the problem that the OP doesn't have 100% PRR, which means that he has to treat it like any other asset disposal (notwithstanding that he will get some PRR along the way.) Not that I want to constrain your argument in any way (except to the extent that you might not be siding with me of course...)

But if you feel strongly about including it, surely it is simpler to include it be rewording (a): (a) my disposal proceeds exceeded 4xAEA (and I don't have 100% PRR).

Okay.

Okay.

Okay.

Beg to differ, for reasons given elsewhere. What is your justification for this assertion?

Reply to
Clifford Frisby

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