CGT question on second home

[zabba]

Hi All

I wonder if you could help me with a CGT question.

My parents bought a second home in 2001 for about £120k, jointly owned until my father died in 2007, at which point the whole property became my mothers. She then sold the property last year, for about £200k. It was never their main property so PPR relief does not apply.

I am trying to calculate the CGT for my mother. Is it correct that I calculate the gain on her share from purchase to sale, and on what was my fathers share from probate value to sale, total the gain, deduct the annual exemption and apply the correct rate of tax? I will include costs of purchase/sale in the calculation.

The property was actually worth more when my father died than it sold for last year due to falling property prices, so the probate to sale "gain" of his share is actually a loss.

Just want to check that this is the correct way to calculate the gain and I'm not missing anything.

[Eric Mc]

Sounds OK to me.

For 2009/10, the CGT rate was 18% (10% for business assets, which a Buy to Let isn't).

Was there any enhancement expenditure on the property over its life?

[zabba]

Thanks Eric.

The property was a new build, so carpets had to be paid for and quite a bit of money was spent on the garden but I'm not sure theses are deductible?

Even if they are, my mother does not have the receipts to back up a claim.

[Eric Mc]

zabba said:

Thanks Eric.

The property was a new build, so carpets had to be paid for and quite a bit of money was spent on the garden but I'm not sure theses are deductible?

Even if they are, my mother does not have the receipts to back up a claim.

That's a pity - because they would have been claimable - unless they had already been claimed as costs against rental income.

If original receipts can't be located, other evidence of expenditure, such as detailed credit card or bank statemnts, cheque stubbs etc are usually acceptable.

[zabba]

Thanks, I will see what documentation she has to back up the claim.

The property was not actually rented out, it was a second home that my mother used during the week, as she worked away from the family home.

[Eric Mc]

zabba said:

Thanks, I will see what documentation she has to back up the claim.

The property was not actually rented out, it was a second home that my mother used during the week, as she worked away from the family home.

Blimey, that sounds like a Main Residence claim could be in order for at least some of the period of ownership.

[zabba]

I thought it was only possible to have one main residence at a time, would nominating the second property as the main one been beneficial? I presume this can't be done retrospectively

[Eric Mc]

zabba said:

I thought it was only possible to have one main residence at a time, would nominating the second property as the main one been beneficial? I presume this can't be done retrospectively

It can.

You need to do some research or get some professional advice.

It might be worth the effort.

Have you calculated the likely Capital Gains Tax liability WITHOUT any claims?

Have a read of this -

http://www.practicalconveyancing.co.uk/content/vie...

[zabba]

The tax liability as it stands is about £1500, thanks largely due to the loss created from probate to sale on my fathers share.

A read of that link indicates that the claim should have been made within 2 years of the purchase. I will think about getting some prefessional advice, but as the liabilty is already relatively low it may not be worth it.