CGT - have I worked this out correctly?

[cosmicgrrl]

Hope someone will be able to help me. I have provisionally worked out my CGT liability (or not as the case may be). But is it correct?

Bought house in 1989 for £32,000 and lived in it as my main residence for 12 years until 2001 when I moved out and rented the whole house to tenants.

If I sell the house this year 2006 for 100,000 (for instance) do I need to pay CGT?

I am assuming I qualify for private residence relief for 12 years. I also understand that the last 3 years also qualify, so a total of 15 years qualify for private residence relief.

Bought 1989 for 32000
Sold 2006 for 100000
Gain = 100000-32000 = 68000

Moved out 2001
For 15 years private residence relief = 15/17 = 15/17 of 68000 = 60000

I believe i qualify for Lettings relief of a maximum of 40000.

Gain 68000.00
PR Relief -60000.00
Let Relief -40000.00

= -32000.00 :)

I have a negative gain. Have I worked this out correctly? doe this mean the IR owe me money (giggle)

Cheers
Cosmicgrrl

[Tristan]

Almost right - the letting relief is a maximum of £40k, but is capped at the amount of the gain.

On the basis of what you've said, the gain will be reduced to nil, so no tax to pay but no loss carried forward (or repayment of tax as you were hoping!).

[Tax Accountant]

Strictly speaking, letting relief is the lower of:
£40,000, and
Gain as a result of letting, and
gain exempted due to private residence relief, and
so much so as to cover any chargeable gains.

As you have been letting the house since 2001, your gains due to letting is 5/17 x 68,000 = 20,000. Therefore, even if you had chargeable gains, after private residence relief, of say 30,000, your lettings relief would be restricted to a maximum of only £20,000.

Also note that due to final 3 years exemption, your chargeable gains due to letting is actually only 2/17ths and not the 5/17ths as stated above. However, it is believed that the Tax office has not yet taken this view and it is expected that they would deem the 5/17ths to be the appropriate fraction for letting relief purposes.

Ramnik