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Category: UK Tax
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Customer Question

Hi Sam.

You have already answered this question once before but i have some amended figures.

My parents wish to sell a rental property and wish to be advised of their potential CGT liability.

My parents haves given me the following data which I believe you will need to work out any CGT liability. Could you please advise if you need any more information.



Relevant Information


Property type :- Semi detached, 3 bedrooms plus garage, central heating built 1954

Purchase Month and Year :- 15th April 1966

Purchase Price :- 4500

Property owned in equal shares by mother and father


Improvements :-

1) Building Ground floor extension carried out 1981, cost approximately 10,000

2) Building Porchway and second bathroom carried out 1986, cost approximately £4,000


3) Building Garage and Brick Shed outbuilding carried out 1986 cost approximately £2000

4) Installing Central Heating Boiler Cost £1600

5) Installing Double Glazing Cost £1600

6) Installing French Doors £1100


We have receipts for items 4,5, and 6 as they have recently been done within the last ten years. In terms of items 1 and 2, we no longer possess the receipts due to the passage of time but can evidence the work the work was done during our years of ownership by copies of building plans approval . Do you think any of these cost are likely to be challenged?


My parents lived in the property between April 1966 and August 1988 as their primary residence.

Since September 1988 the property has been rented out.


My Parents have received an offer of £250,000 for the property and are keen to sell. There are no estate agents involved in the sale, so please assume disposal costs of the property will be around £500 for solicitors fee’s etc.




Other relevant Information

1) I understand you will need a 1982 rebase value in order to do the calculation. The HMRC valuation website indicates an inter war semi detached house with vacant possession is valued at 30,000 in Redhill which is a few miles from Crawley.

http://www.voa.gov.uk/dvs/propertyMarketReport/1982/housingValVacantPossession.html



According to Nationwide house price index, the value would around 33,000, which is in line with the HMRC value. Do you think these valuations would be acceptable to HMRC.


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A property located in Outer Metropolitan which was valued at £250,000 in Q1 of 2012 would be worth approximately£32,334 in Q1 of 1982. This is equivalent to a change of -87.07%.
Legal information








2) Tax Information
3)
Father for 2011-2012


This section provides you with a breakdown of your full calculation.
Profit from UK land and property £6,259.00
Interest received from UK banks and building societies £1.00
UK pensions and state benefits £14,250.00
Total income received £20,510.00

minus Age allowance £10,090.00
Total income on which tax is due £10420


My dad would expect the figure 2012 – 2013 to be roughly the same.

The figure for the current year 2013 -2014 it would be slightly less as rent received would be less due to disposal of relevant property.

In all years there have been no CGT transactions.



Mother

This section provides you with a breakdown of your full calculation.
Profit from UK land and property £6,259.00
Interest received from UK banks and building societies £1.00
UK pensions and state benefits £10,268.00
Total income received £16,528.00


minus Age allowance £9,940.00

Total income on which tax is due £6,588.00



My mum would expect the figure 2012 – 2013 to be roughly the same.

However for the current year 2013 -2014 it would be reduced as rent received would be less due to disposal of relevant property.

In all years there have been no CGT transactions.
Submitted: 1 year ago.
Category: UK Tax
Expert:  Rachel-Mod replied 1 year ago.

Hello,


I'm Rachel, and I’m a moderator for this topic. I sent your requested professional a message to follow up with you here, when they are back online.

If I can help further, please let me know. Thank you for your continued patience.


Best,

Rachel

Expert:  Lindie-mod replied 1 year ago.

Hello,

I'm Lindie, and I’m a moderator for this topic. I've been working hard to find a professional to assist you right away, but sometimes finding the right professional can take a little longer than expected.

I wonder whether you're ok with continuing to wait for an answer. If you are, please let me know and I will continue my search. If not, feel free to let me know and I will cancel this question for you. Thank you!

Best,

Lindie

Customer: replied 1 year ago.

Hi Lindie


 


I am happy to wait a little longer.


 


thanks


 


Paz

Expert:  Sam replied 1 year ago.

Hi Paz

 

Thanks for asking for me and apologies for the delay in my response, I did not see the question listed within the UK tax forum until today.

 

Do you still wish to proceed with this question?

 

I am out this morning with clients, but will review this, should you still require a response, this afternoon

 

Thanks


Sam

 

 

Customer: replied 1 year ago.

Yes please

Customer: replied 1 year ago.

Hi Sam


 


do you have an idea when you will be able to give response

Expert:  Sam replied 1 year ago.

Hi Paz

 

Sorry for the delay, I was caught up on my return yesterday.

 

The capital gain position would be as follows -

 

The initial gain (using the rebasing value of £32,334,but I would arrange to get a proper valuation from the valuation office) would be £217,666 from which you can deduct £250 for the sale costs, and I am afraid only capital costs for 4,5 and 6, (as you have no receipts for 1, 2 or 3) which total £4300

This leaves a gain of £213,116

Private residence relief, would be due as follows

Purchase date 1966 to sale date (approx. Oct 2013) total ownership period 570 months

Period of time it was the main residence from April 1966 to Aug 1988 - 26 months which is added to the last 36 months of ownership for private residence relief, so a total period of 62 months

 

So to calculate the private residence relief £213,116 x 62/570 = £23,181

This is deducted from the gain leaving £189,935

 

Next private residence relief is considered

This is the lesser of

1) The amount of gain on which private residence relief has been applied - £23,181

2) The amount of gain left over after private residence relief has been applied - so £189,935 OR

3) £40,000

 

As the lesser is 1) the amount of gain on which private residence relief has been applied - £23,181 this is deducted from the remaining gain of £189,935 = £166,754

 

This is then split 50:50 between your parents - so a gain of £83,377 each

 

For your Dad - his first £10,600 is exempt - so £72,777 is the gain - of which approx. £21,965 would be liable to 18% (although this will be a little more, as not a whole year of rental income will arise) and the remaining gain at 28% - so capital gains of £18,181.60

 

For your Mum, again the first £10,600 would be exempt - and the first £25,947 would be liable at 18% and the remainder at 28% - so capital gains of £17,782.80

 

Thanks

 

Sam

 

 

Customer: replied 1 year ago.

Hi Sam


 


Thanks for your response. I have been looking at the HMRC Fact sheets in relation to CGT and most notably Fact sheet 283 on private residence relief.


 


 


The eriod of ownership should start from 1982 Rebasing point and not purchase date of property. Please see page 3 /4 of fact sheet.


 


 


www.hmrc.gov.uk/helpsheets/hs283.pdf‎


 


You appeared to have made same mistake in a previous question i asked. I am afraid this appears to be quite a fundamental error

Expert:  Sam replied 1 year ago.

Hi

 

I do apologise, I shall opt out and let another expert help you.

 

Thanks

 

Sam

Expert:  Lindie-mod replied 1 year ago.

It seems the professional has left this conversation. This happens occasionally, and it's usually because the professional thinks that someone else might be a better match for your question. I've been working hard to find a new professional to assist you right away, but sometimes finding the right professional can take a little longer than expected.

I was checking to see if you had already found your answer or if you still needing assistance from another one of the professionals?

Please let me know if you wish to continue waiting or if you would like for us to close your question.

Also remember that JustAnswer has a multitude of categories to help you with all your needs from Health, Pets, Computers, Taxes, Cars, Finance, Law, to Home Improvement, and more.


Thank you,

Lindie

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