Tax form - capital gains tax help!
Discussion
Bit of background:
Bought a flat in 2003, moved out in 2005 and let flat out. Then tenants did a runner in 2007 and sold flat in 2008.
Trying to fill in my self assessment tax form, however looking at it I'm actually not sure that I need to.
-I didn't actually make or loose any money in that tax year as I didn't get any rent.
-I did sell and made a little more that the £9,000 allowance
-But as I have lived in the property I believe I am entitled to letting relief of up to £40,000
-I can't find anywhere on the internet form to claim letting or residence relief so I'm guessing I don't have to declare it.
Am I right can I tell Mr Tax man to stick his forms?????
Bought a flat in 2003, moved out in 2005 and let flat out. Then tenants did a runner in 2007 and sold flat in 2008.
Trying to fill in my self assessment tax form, however looking at it I'm actually not sure that I need to.
-I didn't actually make or loose any money in that tax year as I didn't get any rent.
-I did sell and made a little more that the £9,000 allowance
-But as I have lived in the property I believe I am entitled to letting relief of up to £40,000
-I can't find anywhere on the internet form to claim letting or residence relief so I'm guessing I don't have to declare it.
Am I right can I tell Mr Tax man to stick his forms?????
Bit of background:
Bought a flat in 2003, moved out in 2005 and let flat out. Then tenants did a runner in 2007 and sold flat in 2008.
Trying to fill in my self assessment tax form, however looking at it I'm actually not sure that I need to.
-I didn't actually make or loose any money in that tax year as I didn't get any rent.
-I did sell and made a little more that the £9,000 allowance
-But as I have lived in the property I believe I am entitled to letting relief of up to £40,000
-I can't find anywhere on the internet form to claim letting or residence relief so I'm guessing I don't have to declare it.
Am I right can I tell Mr Tax man to stick his forms?????
No.
You disposed of a property and presumably received more than £30,000 for it. You are therefore legally obliged to make a return.
First of all, work out the gain properly (most non-accountants don't know how to).
Cost - the cost of the property is the full purchase price PLUS all of the legal and ancilliary costs involved in the purchase.
Enhancement Costs - if you made any capital improvements to the property during your period of ownership you need to add them on to the original cost.
Selling - you will have incurred costs as part of the sales process. You need to add those costs onto the original costs as well.
Sale proceeds - you then offset against all of the above the full proceeds received (before deductions for stamp duties, fees, solitiors costs etc).
As you lived in the flat for a while, the period of time you lived there plus an additional three years is exempt from CGT. You don't give the exact months or days involved in the details shown above (you really should do these calculations based on the exact number of days involved) .
This gives you your basic gain.
An example -
Say you lived there from 1 June 2003 to 31 August 2005. That is a period of 823 days.
Say you bought the flat on 1 June 2003 and sold it on 30 September 2008. That is a total period of ownership of 1,947 days.
Say that the net basic gain comes to £45,000.
Before you work out the taxable element of the gain, you need to time apportion the gain to reveal that part of the gain that falls outside the Main Residence exemption period. In this case, the period where the flat was your main residence will be 823 days plus three years i.e. 823 plus 1,095 = 1,918.
THe gain is then apportioned as follows - £45,000 x 1,918/1,947 = £44,330.
The £44,330 represents that part of the gain related to the period when the flat was your main residence. That means that the remaining balance of £670 is the taxable amount.
However, this is more than covered by the 2008/09 personal Capital Gains Allowance of £9,600 so you would have no CGT liability.
So, before seeking the Residential Letting Allowance, cary out the above exercise to see if the final gain is greater or less than £9,600.
If the flat was jointly owned, then two lots of £9,600 are available for offset.
I do not use HMRC's own on-line filing facility (I use specialist approved software of my own). As far as I know, the HMRC on-line screens do not give adequate boxes or space to allow a full CGT computation to be carried out. All you can really do is work out the calculations yourself and then slot in the final position in the relevant boxes on the return. As a professional accountant, I always supply to HMRC full computations as an attachment to the electronic tax return just so HMRC have the full picture as to where the figures come from. My software allows me to do this. I'm not sure if HMRC's does.
Bought a flat in 2003, moved out in 2005 and let flat out. Then tenants did a runner in 2007 and sold flat in 2008.
Trying to fill in my self assessment tax form, however looking at it I'm actually not sure that I need to.
-I didn't actually make or loose any money in that tax year as I didn't get any rent.
-I did sell and made a little more that the £9,000 allowance
-But as I have lived in the property I believe I am entitled to letting relief of up to £40,000
-I can't find anywhere on the internet form to claim letting or residence relief so I'm guessing I don't have to declare it.
Am I right can I tell Mr Tax man to stick his forms?????
No.
You disposed of a property and presumably received more than £30,000 for it. You are therefore legally obliged to make a return.
First of all, work out the gain properly (most non-accountants don't know how to).
Cost - the cost of the property is the full purchase price PLUS all of the legal and ancilliary costs involved in the purchase.
Enhancement Costs - if you made any capital improvements to the property during your period of ownership you need to add them on to the original cost.
Selling - you will have incurred costs as part of the sales process. You need to add those costs onto the original costs as well.
Sale proceeds - you then offset against all of the above the full proceeds received (before deductions for stamp duties, fees, solitiors costs etc).
As you lived in the flat for a while, the period of time you lived there plus an additional three years is exempt from CGT. You don't give the exact months or days involved in the details shown above (you really should do these calculations based on the exact number of days involved) .
This gives you your basic gain.
An example -
Say you lived there from 1 June 2003 to 31 August 2005. That is a period of 823 days.
Say you bought the flat on 1 June 2003 and sold it on 30 September 2008. That is a total period of ownership of 1,947 days.
Say that the net basic gain comes to £45,000.
Before you work out the taxable element of the gain, you need to time apportion the gain to reveal that part of the gain that falls outside the Main Residence exemption period. In this case, the period where the flat was your main residence will be 823 days plus three years i.e. 823 plus 1,095 = 1,918.
THe gain is then apportioned as follows - £45,000 x 1,918/1,947 = £44,330.
The £44,330 represents that part of the gain related to the period when the flat was your main residence. That means that the remaining balance of £670 is the taxable amount.
However, this is more than covered by the 2008/09 personal Capital Gains Allowance of £9,600 so you would have no CGT liability.
So, before seeking the Residential Letting Allowance, cary out the above exercise to see if the final gain is greater or less than £9,600.
If the flat was jointly owned, then two lots of £9,600 are available for offset.
I do not use HMRC's own on-line filing facility (I use specialist approved software of my own). As far as I know, the HMRC on-line screens do not give adequate boxes or space to allow a full CGT computation to be carried out. All you can really do is work out the calculations yourself and then slot in the final position in the relevant boxes on the return. As a professional accountant, I always supply to HMRC full computations as an attachment to the electronic tax return just so HMRC have the full picture as to where the figures come from. My software allows me to do this. I'm not sure if HMRC's does.
diesel head said:
Thankyou for that, I don't owe Mr Brown anything, but you are right there isn't a space for the calculation in the forms will give HMRC a call later and ask how they want me to submit the calculation.
Thankyou again!
They don't have ANY format for submitting the calculation.Thankyou again!
There are some serious legal issues with Self Assessment and the filing of returns on-line using the HMRC screens.
The Self Assessment legislation states that it is the taxpayer's duty to notify HMRC of taxable events and tax amounts due using the Self Assessment system. They also state that it is a legal requirement to submit, together with the return, all supporting computations, calculations and other information that the taxpayer THINKS tax officials MIGHT need to fully understand the basic figures on the retuin.
Unfortunately, their on-line filing facility provides extremely limited space to provide this data. In some cases, it provides no space at all.
Nearly all the commercial software systems which can be used as an alternative to the crummy HMRC version DO allow these extra details to be provided as attached pdf files.
Gassing Station | Finance | Top of Page | What's New | My Stuff