Cgt liability on property..

[Lucy1101pink]

Can anyone help with a ball park figure on working out my cgt liability?

Heres the details:

Flat purchased march 2001 for £79,000 jointly by myself and husband and let out continually (bar a brief 6 week refurb period) until june 2008 when we separated and i moved into the flat as my main residence.

We then divorced and sold the flat November 2009 and i moved into a house in my sole name.

flat purchase £79,000
expenditure during owning it (incl legal costs to buy and sell, refurb) etc £11,000
selling price £130,000

I think i may be entitleled to claim PRR as i lived in the flat from june 2008 to November 2009 as my home. Not sure if im right but if i am think that would dramatically reduce my cgt bill?

If anyone can tell me if I'm right and how i go about working out the PRR I would be very grateful

Lucy

[jeffrey]

Was the sale ordered by Court in matrimonial proceedings?

[Lucy1101pink]

No, was mentioned that it was our intention to sell to allow me to buy a bigger property in the financial agreement but not 'ordered' by court.

L

[Telometer]

There may be a risk that your residing in the flat is regarded - with your stated intention to sell it and move somewhere bigger - as nothing more than temporary, so it never became your PPR so no PRR is due. On the other hand I think that may be a bit unfair.

Assuming relief is due:

1. Did you obtain tax relief for the refurb when you did it? Assuming you didn't:

Profit on sale 40k.

Owned 8.5 years, last three deemed tax free = 3/8.5*40k = 14k
Lettings relief restricted to 14k

Gain taxable 12k, less annual exempt amount 10k, taxable 2k @ 18/28%.

Max tax £600 A good result.

[TaxationPete]

Well on surface of your details there may be a small CGT liability. The refurb costs are not deductible as they are a revenue item most probably depending on what they were and when you did them. It will qualify as your PPR if at that time you owned no other property or you were actually divorced and this will facilitate Letting Relief. Please detail the actual acquisition and disposal sales and legal fees. I have assumed £5,000 and that would give you a liability of around £750. Regards Peter

[TaxationPete]

Telometer has a good point. Did you put it up for sale as soon as you moved in as they may be detrimental to any PPR claim. We would also need you normal annual income in the FY of disposal to correctly indictae your CGT liability. Regards Peter

[Lucy1101pink]

No, not put up for sale until the aug 2009, sold stc within 9 days, when moving in was definitely not assumed temporary as had no idea how things would pan out!

Purchased march 2001, sold nov 2009 so owned for 104 months
purchase price £79,000
selling price £130,000

No tax relief claimed on refurb (windows, bathroom,kitchen) costing approx £6k, disposal/aquistion fees £5k


Did technically own another property as still on deeds of marital home (never rental property) which i left, this was transferred to husband when i bought the new property i live in now...

annual income for 2009/10 gross £36k, does this put me in the higher tax bracket? Hope not!

thanks for your help x

[TaxationPete]

Well the good news is that if it did not qualify as your PPR then the disposal of your share ( 50% ) would cost you £1,418 of 18% CGT and a further £1,407 OF 28% cgt. I assume the refurb was after you moved in and for your benefit so not deductible.
When you moved into the ex rental property were you officially seperated, if so then you may be able to claim PPR and LR. The PPR would wipe out your CGT liability so worth a try but be prepared for questions from HMRC. Regards Peter