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Sam
Sam, Accountant
Category: UK Tax
Satisfied Customers: 12834
Experience:  26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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Dear XXXXX, One of my family friends couple bought a house

Resolved Question:

Dear XXXXX, One of my family friends couple bought a house in 2001 for £150,000.00 Lived there for 6-7 years. Moved out of this to another house and lived in the 2nd house for 2-years. Then moved in again into the first house lived there for another 3 years. After that the house was rented out for 8-years and sold off in 2012. The solicitor subjected this house to Bed and Breakfast treatment in 2012 for £350,000.00 and sold off for £450,000.00 As the house has been subjected to bed and breakfast treatment, can we take the route of :- Principal private residence..... relief for the years they lived there Private letting releif........... 3-years. There is also a taper relief.......... In my view, PPR can't be taken as the house has been subjected to Bed and Breakfast treatment. Please advise, which route should be taken to minimise the CGT. It is not that the couple don't want to pay any CGT but are being forced to consider to lower the taxes as their business took a tumble and they almost lost their business due to recession. I await your opinion, and with regards, XXXXX XXXXX

Submitted: 1 year ago.
Category: UK Tax
Expert:  Sam replied 1 year ago.

Hi Mohan

 

Thanks foe your question and asking for me.

 

Can you clarify the position as the dates do not add up.

House bought 2001 main residence to 2007 or 2008

Then became main residence again in 2010

Then rented out for 8 years - this takes us up to 2018 (and we are only 2013!) and you advise it was sold in 2012

 

I am due out soon to meet with clients, but will respond when I am back this afternoon

 

Thanks

 

Sam

 

 

Customer: replied 1 year ago.

Dear XXXXX,


 


The house was purchased in 1982.


 


1) Lived there till 1992


2) Moved to 2nd house and lived there from 1992 to 1994.


3) moved back to first house and lived there from 1994-2000.


4) Rented out from 2000 to 2012(summer) when it was sold.


5) During this period various loans were raised to adopt the house


for the needs of special people.


 


6) I think, the solicitor subjected the first property to bed and breakfast


treatment to the tune of £350,000.


7) In 2012, it was sold off for £450,000.



Soon, the 2nd house would be put up for sale. Can we treat the 2nd house also as PPR as she lived there for 2-years. And also 3-years private letting relief.



She also sold another house very recently and can she claim taper relief as non-business asset: She had this house in possession for over 4 years meaning 10% relief.( I will look at the chart to be precise as regards to % relief).



Because of the negative equity, the bank is forcing her to sell her properties to recover the difference between the amount borrowed and present value of the property. The properties were purchase at the peak of boom.



The lady is not quite confident in providing any information except some scant information and from this scant information, I will have to draw the conclusion for CGT. The inspector (tax) in our area is a little bit lacking in the name of humanity and is not willing to advise the precise course, which should be taken to avoid unpleasantness.



Thanks



With regards,



Mohan J.Mitra

Expert:  Sam replied 1 year ago.

Hi Mohan

 

Thanks for the additional information

 

Just one further clarification, why was the first property subject to bed and breakfast treatment? (I assume you mean that the income was treated as trade rather than rental income)

Where did this lady live between 2000 and 2012 ?

 

And then you mention a third property, can you expand on this?

 

Thanks


Sam

Customer: replied 1 year ago.

Dear XXXXX,


 


Sorry for not responding earlier than this. I was not feeling well. I mean by Bed and Breakfast- as treatment to shares. The solicitor has done to this effect to reduce CGT, I suppose.


 


I am trying to get in touch with the solicitor and let your good know.


 


The lady bought another house and lived there from 2000-2012.


 


Mohan J.Mitra


 


Let me know if your good self need to know any more information.


 


It came to light lately, she has a number of properties. If in future, she sells one, what relief she will be entitled to.


 


Thanks and with regards,

Expert:  Sam replied 1 year ago.

Hi

 

Thanks for your response

 

If the properties are owned in her name (rather than a limited company) then I have no idea why shares have been considered in the property - can you expand?

 

Thanks


Sam

 

Customer: replied 1 year ago.

Dear XXXXX,


 


The properties are solely and wholly are owned by her. I was just giving example as certain people to crystallize the loss/profit, subject the property/assets to 'Bed & Breakfasting'. I am not sure if the solicitor has done so. I will let your self know when I find out the whole picture of it.


 


Assuming nothing of that sort has been done so, let me know in full if we can claim as under:-


 


Can we claim PPR for the first property having lived there?


 


from 1982 - 1992


from 1992-1994


 


Also private letting relief.- 3 years provided it is less then PPR and gain gained during the renting years and/or less than 40,000.


 


2nd Property:-


 


Lived there for 2-years from 1992-1994-PPR


3-years private letting relief.


 


With regards,


 


Mohan J.Mitra,


 


 


 

Expert:  Sam replied 1 year ago.

Hi Mohan

 

Thanks for your response

 

1) First property- Yes PPR is due for the time she lived there and the last 36 months of ownership, and private lettings relief, up to £40,000 (or though the lesser of the £40,000, the amount of PPR due, or the amount of gain left over after PPR has been applied)

2) PPR due for the time she lived there and the last 36 months of ownership and private lettings relief, and the correct proportion of PPR assuming the property has been let for all other periods of time (again subject to the restrictions advised above)

 

Thanks


Sam

Sam, Accountant
Category: UK Tax
Satisfied Customers: 12834
Experience: 26 HMRC expertise, PAYE, Self Assessment ,Residency, Capital Gains, CIS ask for Sam Tax
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