Capital gain tax

mc25

Bought property on June 1980 £10000
Lived in it as main residence until 2007. Then took mortgage out in 2006. Rented the house from 01/07/2008 until 25/09/2009,Rental income 7500 with the following expenses incurred insurance 350 rr 650 interest 13000. There was solicitors fee paid 800 + 3500 estate agent fee. Then finally sold the property in Feb 2010 150000.
Rental income 7500
Int 13000
Other exp -1000
Loss -6500

With the above figure can i deduct the loss £6500 before I work out the Capital Gains that is:

Sale 150000
Cost -10000
Expen -3500
Expen -800
135700
Loss -6500
129200
Dividend by 2 and owned jointly 64600
Less Annual exempt 10100
54500
Capital gains 9810
Thank you

T.C.

No the loss cannot be deducted from capital gains. This is a separate thing altogether. The loss should be included on the land and property income.

Monsoon

I don't do CGT but shouldn't there be some indexation to allow for inflation between 1980 and sale?

Also if it was PPR til 2007 I don't think you claim the full amount to CGT, there is an apportionment (but as I don't do CGT I can't remember how to do it). Won't they be paying too much CGT if you charge the whole amount?

And no, the loss for rental income can only be set against other rental income losses IIRC.

mc25

Thanks

Thanks both for your repiles, I did have the doubt on the loss+ not sure about the appotionment from the time bought - rented out and then sold, so any more views and help will be welcomed.

Thanks

Monsoon

mc25 wrote: »

Thanks both for your repiles, I did have the doubt on the loss+ not sure about the appoinment from the time bought - rented out and then sold, so any more views and help will be welcomed.

Thanks

Can I ask if you're doing this for a client? If you aren't sure, then maybe you ought to be subbing this to someone who knows (that's what I do and the ACCA I use is great and very reasonable rates).

If you're a MIP then the tax helpline will advise you. Just getting advice off a forum isn't enough, CGT is an expensive tax, moreso if it's not done correctly and you've already said you're not sure on bits.

I'm not trying to be negative, I just think it's important to mention.

T.C.

I do CGT on occasions, but find the tax books great for guidance. Check your tax guide - it will really help you get things right.

mc25

Thanks

Somebody asked me the question I am not doing it for client, in future yes is something I am considering doing. T.C which tax book can you recommend.

Thanks

qwerty

When in 2007 did the property cease to be the principal private residence (PPR) of the owner?

I ask because as long as the property was the PPR of the owner at some point during the period of ownership then the final three years of ownership are 'deemed' to be the PPR of the owner.

Therefore, assuming the property was a PPR until at least February/March 2007 (depending on actual dates):
From date of purchase to 2007 - actual PPR - exempt from CGT
Final 3 years of ownership (Feb 2007 to Feb 2010) - deemed PPR - exempt from CGT

It may therefore be that the whole of the gain is exempt from capital gains tax.

Even if this is not the case, and the owner moved out in early January 2007, the short period which would be left as chargeable would be covered by the annual exemption (assuming no other capital gains in year).

mc25

Thanks

Thank for your reply, Moved out on 01/04/2007. Does the exemption still apply even though now they have a second property as the main residence now.

qwerty

Yes.

Although the second property is the PPR from 01/04/07, the first property would have 'deemed PPR' status for the final three years of ownership. It just so happens that within this final three years the property is sold and therefore the whole of the gain is exempt due to actual and deemed PPR.

In this situation the person can claim PPR on two properties at the same time.

Monsoon

Qwerty thanks for refreshing my memory! Glad you got a good answer mc25

T.C.

Lots of good tax guides out there. I like St James Place for complex issues, but also Daily Mail and FT Tax Guides for general issues.

mc25

thanks

Thanks all for your replies