HMRC - Capital Gains Tax advice needed
Discussion
Good evening all,
It's the first time I've posted in here so please go gentle with me
I've come home from work today to a lovely letter from the HMRC entitled " Do you need to tell us more about a residential property you have sold " and a short letter saying we think you owe us CGT, get back to us by the 9th August or else. I'm just after some advice on how best to proceed with this please
A brief history is that about 8 years ago I was made redundant although I managed to find work in Leeds quite soon after. I owned my house (with Mortgage) and decided that I would let it out so I could keep a base in my home town and I moved up north and rented a place in Leeds. Approx three years later I made it back to my home town and ended up living at my girlfriends house.. soon after we ended up selling both our houses and buying one together.
My question is where do I start working out if, and how much CGT I might owe? I've been on the HMRC website but it isn't an easy read and I can't get my head around how much profit I could be taxed on bearing in mind I owned the house for about 8 years in total and was living in it for 5 of those; so yes I did make some profit on the house. Also how do they prove where your main home is / was during this period.. is it on electoral role or something like that?
Sorry to ramble on but if anyone has any advice or could point me in the right direction of whom to speak to it would be much appreciated. Bit worried that's all
Cheers
p
It's the first time I've posted in here so please go gentle with me
I've come home from work today to a lovely letter from the HMRC entitled " Do you need to tell us more about a residential property you have sold " and a short letter saying we think you owe us CGT, get back to us by the 9th August or else. I'm just after some advice on how best to proceed with this please
A brief history is that about 8 years ago I was made redundant although I managed to find work in Leeds quite soon after. I owned my house (with Mortgage) and decided that I would let it out so I could keep a base in my home town and I moved up north and rented a place in Leeds. Approx three years later I made it back to my home town and ended up living at my girlfriends house.. soon after we ended up selling both our houses and buying one together.
My question is where do I start working out if, and how much CGT I might owe? I've been on the HMRC website but it isn't an easy read and I can't get my head around how much profit I could be taxed on bearing in mind I owned the house for about 8 years in total and was living in it for 5 of those; so yes I did make some profit on the house. Also how do they prove where your main home is / was during this period.. is it on electoral role or something like that?
Sorry to ramble on but if anyone has any advice or could point me in the right direction of whom to speak to it would be much appreciated. Bit worried that's all
Cheers
p
You need an accountant. And I can vouch for the PH resident one - Eric Mc.
Yes, he will charge. Yes, there is a very good chance that the savings he points out to you will exceed his fee several times over.
Yes, capital gains on property is hard to work out. Yes, HMRC have very big sticks to wave in your general direction if you get it wrong (although they are unlikely to use them ... much.)
Oli.
Yes, he will charge. Yes, there is a very good chance that the savings he points out to you will exceed his fee several times over.
Yes, capital gains on property is hard to work out. Yes, HMRC have very big sticks to wave in your general direction if you get it wrong (although they are unlikely to use them ... much.)
Oli.
I'll leave it to the experts for chapter and verse but it sounds as if you might well have nothing to owe. If it is a property you have at some point lived in and at some point rented out, then there are various CGT breaks.
For example, no CGT while it is your Principal Private Residence, no CGT for up to three years while you rent it out, a £40k additional CGT allowance on eventual sale.
So, if you lived in it for 5 years and rented out for 3 years then you will have no CGT to pay.
It has been a while since I've looked into this - my wife rented out her flat for a couple of years after we met. So the rules might well have changed or I might be incorrectly remembering (I'm pretty sure about the 3 year rule but I could have got the additional £40k bit wrong).
Presumably you paid tax on the profit from the rental income?
For example, no CGT while it is your Principal Private Residence, no CGT for up to three years while you rent it out, a £40k additional CGT allowance on eventual sale.
So, if you lived in it for 5 years and rented out for 3 years then you will have no CGT to pay.
It has been a while since I've looked into this - my wife rented out her flat for a couple of years after we met. So the rules might well have changed or I might be incorrectly remembering (I'm pretty sure about the 3 year rule but I could have got the additional £40k bit wrong).
Presumably you paid tax on the profit from the rental income?
I´m not a lawyer on this, but has to investigate factsheet 283....
http://www.hmrc.gov.uk/cgt/property/sell-own-home.... The full pages
The relevant parts are:
"Working away from home
You'll still get the full relief if you couldn’t live in your home because you were employed and either:
you carried on all of your work or duties outside the UK
the distance from work or the requirements of your job stopped you living at home - and you were absent for less than four years
The following must also apply:
the house was your only or main home both before and after you worked away
you were not entitled to Private Residence Relief on any other property during that time (see 'Owning more than one home' below if you're unsure)
If you can't return to live in the house because your existing job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
Example
You bought a house in 1994 and used it as your main home.
Your employer sent you to work abroad in 1995.
You returned to your main home in 2000 and lived in it until you sold it in 2011.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad"
It looks like anyone working away from home gets relief however.......
Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
Example
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
£40,000
£36,000 (the Private Residence Relief due)
£24,000 (the gain on the part of the property that's been let)
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
Helpsheet 283 gives me some hope!!
http://www.hmrc.gov.uk/cgt/property/sell-own-home.... The full pages
The relevant parts are:
"Working away from home
You'll still get the full relief if you couldn’t live in your home because you were employed and either:
you carried on all of your work or duties outside the UK
the distance from work or the requirements of your job stopped you living at home - and you were absent for less than four years
The following must also apply:
the house was your only or main home both before and after you worked away
you were not entitled to Private Residence Relief on any other property during that time (see 'Owning more than one home' below if you're unsure)
If you can't return to live in the house because your existing job still requires you to work away, you'll get the full amount of relief.
See the section 'Living away from home' below if you were absent for other reasons.
Example
You bought a house in 1994 and used it as your main home.
Your employer sent you to work abroad in 1995.
You returned to your main home in 2000 and lived in it until you sold it in 2011.
You're entitled to full Private Residence Relief as your absence was because you had to work abroad"
It looks like anyone working away from home gets relief however.......
Letting all or part of your home
If you've let out all or part of your home you may not get full Private Residence Relief when you sell or dispose of it, but you may get another relief known as 'Letting Relief'.
The maximum amount of Letting Relief due is the lower of:
£40,000
the amount of Private Residence Relief due
the amount of gain you've made on the let part of the property
Example
You used 60 per cent of your house as your home and let out the other 40 per cent.
You sell the property, making a gain of £60,000.
You're entitled to Private Residence Relief of £36,000 on the part used as your home (60 per cent of the £60,000 gain).
The remaining gain on the part of your home that's been let is £24,000.
The maximum Letting Relief due is £24,000 as this is the lower of:
£40,000
£36,000 (the Private Residence Relief due)
£24,000 (the gain on the part of the property that's been let)
There's no Capital Gains Tax to pay - the gain of £60,000 is covered by the £36,000 Private Residence Relief and the £24,000 Letting Relief.
Helpsheet 283 gives me some hope!!
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