Owner's father lived in flat now sold; what CGT to pay?

[jules1a]

Hi

I bought a flat for my dad to live in rent free in Sept 1999 for 27.5k.
I have never contacted hmrc about any costs or anything.
I sold it in Jan 08 for £85k.
1 - Can i say i lived in it as PPR for some years to avoid cgt? ( i did on and off nursing him )
2 - What cgt would be due? Can i offest the annual costs of the upkeep and running of the flat or the mortgage interest ( on another property ) remortgaged to pay for it?
What detail does hmrc need in a calculation?
How does hmrc pick up that there may be cgt?

Thanks so much
jules

[Steve Sims]

This property is treated as an uncommercial let, which means it is tax neutral in terms of expenses as you may only claim costs up to the level of rents received - in your case zero.

The property does not qualify for dependent relative relief, because it was bought after April 6, 1988.

Therefore the standard CGT rules apply to the disposal as you cannot claim it as a second home as your stays were only temporary. Trying to say it was your PRR is not an argument that would stand up.

The obligation is for you to tell HMRC about your CGT liability - to not tell them is tax evasion and illegal.

[jules1a]

Thanks Steve, I had no idea what to do.

[TaxationPete]

Here are the basic calculation for your CGT liability uner the old rules. You will need to deduct Legal and acquisition and sales and legal fees and any enhancement costs from the gross gain.
Capital Gains Summary

Purchase Price £27,500 14/09/1999
Indexation 0.000 £27,500
Legal Fees £0
Sale Price £85,000 14/01/2008
Enhancements £0
Legal Fees £0
Gross Gain £57,500
PPR Relief £0 £57,500
Letting Relief £0 £57,500
Taper Relief 30% £40,250
CG Allow'ce 1 £9,200 £31,050
CG Bill £5,987

Hope that helps. Regards Peter

[jules1a]

Hi Peter

That is excellent - thanks so much - I am a 40% tax payer which will whack it up to £12.5k based on what you have written.
I will look into the purchase costs, selling costs etc and maybe get it down a little.
I appreciate your time.

Kind Regards

jules

[Telometer]

Steve Simms seems to have further information that is not in the original post.

Whether or not you lived in the flat as your PPR is a matter of fact. If I were to ask you, in all honesty, whether it was the place you called home, then you will probably get the right answer.

On and off could mean some days you "lived" there, some you lived at your home. In which case no PPR relief.

Or it could mean that you lived there for two two-year stretches whilst renting out your own home. In which case there is a very forceful argument that you are entitled to PPR relief.

[TaxationPete]

You forgot the Jules1a may have owned another house that was a home and PPR. So no chance. They did not move into the dads property lock stock and barrel with DVLA, passport records, Electoral register, HMRC contact address or anthing . Again no chance. Regards Peter

[Telometer]

I forget nothing; I wrote exactly what you wrote for one scenario!

Unless you have additional knowledge obtained outwith this thread, you have based your conclusion on invented background: "They did not move into the dads property lock stock and barrel with DVLA, passport records, Electoral register, HMRC contact address or anthing." We do not know!

As for how they might pick it up, they might examine the land registry transactions - which are included for SDLT purposes.

[TaxationPete]

What. !!!!!! Lets wait for Jules1a to tell us exactly what they did. Regards Peter