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Capital Gains Tax

acsacsacsacsacsacs Feels At HomeRegistered Posts: 43
in General accounting discussion
Not something I have really dealt with but

have been contacted by a client today who has a second home owned by himself, his wife and son.

If he sold it, the profit (say £50,000) could be split between the 3 of them and therefore between them only pay tax on £20,000? Is that right?

Also he mentioned something about a seven year rule? Something I've not heard of that could be used to get rid of capital gains? I know bits about the seven year rule on inheritance tax but nothing about capital gains? Any help would be appreciated.

Thanks

Comments

  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    If you haven't really dealt with this kind of work then I highly recommend you subcontract this to someone who has. It's only fair on the client.

    If you want someone good to subcontract your CGT work to please contact me, I have a very good ACCA I use for this.

    However, as a general rule of thumb:
    If an asset is jointly owned (and this is legally documented) then yes, the profit is slplit 3 ways.
    Each person would then have their own capital gains tax free amount (£9600 a year from memory) and pay CGT on the remainder.

    I don't know about the 7 year thing for CG.
    CG work is billable for the advice more than the time doing the computations, so factor this in.
    My advice is to get a good subcontractor or tell the client you don't do CG work :)
  • T.C.T.C. Experienced Mentor Registered, Tutor Posts: 1,448
    Get yourself a good tax book, ie St James Place Tax Guide. It is not expensive and will tell you all the basics to work out the capital gains liability.
    Don't be afraid to learn!
  • MonsoonMonsoon Font Of All Knowledge FMAAT, AAT Licensed Accountant Posts: 4,071
    I guess it depends how often CG work comes up as to whether it's worth learning it, continuing CPD on it, etc.

    This is just my personal view but as I use it so rarely, it's a better use of my time to concentrate on the things I'm good at and get someone else to do the odd CGT work that comes in. CGT is pretty simple on the face of it but can rapidly get complicated which is why I wouldn't want to let a client rely on me to complete it personally. I really enjoyed studying it for AAT but then didn't use it for 2 years. The thought of doing a share calculation then filled me with horror :lol:
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