CGT advice needed

[gunther1]

Could you please offer me some advice re CGT.

OK - facts.

I own a flat which was bought in 1999 for c £59k. I lived in it until October 2002 when I moved to a different UK city (moved for work purposes). The flat has been used by my sister rent free since i moved out. Bought a new property in June 2003. Have not registered either as my ppr, but clearly my new property is. (Should have done this a long time ago I think)

Am planning to sell the flat now and will sell for c £150k. I think I get 3 years to sell it tax free?

1) What should i now tell HMRC re the property i am selling (i.e. declare my new property as PPR)
2) Is the 3 year tax free period from June 2003 (when i bought the second property) or Oct 2002 (when i moved out)?
3) How do I calc the CGT based on above?
4) can you suggest any way to avoid (i.e. legally) tax. i.e. sell quickly, transfer half into fathers name so we can both use allowance etc.

Appreciate your help.

[Tax Accountant]

Could you please offer me some advice re CGT.

OK - facts.

I own a flat which was bought in 1999 for c £59k. I lived in it until October 2002 when I moved to a different UK city (moved for work purposes). The flat has been used by my sister rent free since i moved out. Bought a new property in June 2003.

Have not registered either as my ppr, but clearly my new property is. (Should have done this a long time ago I think)

You can only decide which property you want to benefit from PPR relief if you are using more than one property as your residence. You are clearly not using the 1st property as your residence and therefore you only have one residence. You cannot make a nomination even if you wanted to.

Am planning to sell the flat now and will sell for c £150k. I think I get 3 years to sell it tax free?

1) What should i now tell HMRC re the property i am selling (i.e. declare my new property as PPR)

Your new property is automatically your ''only or main residence'' and therefore there is no need to make a nomination.

2) Is the 3 year tax free period from June 2003 (when i bought the second property) or Oct 2002 (when i moved out)?

Normally this would have been from the date when you actually ceased using it as your residence. However, in your case the 3 year exemption period starts from June 2003 because you moved away from home as a result of your employment. You are allowed to be away for upto 4 years on account of your employment but in your case this stops at June 2003 because you have your new property which qualifies from that date and only one property can qualify at any one time.

3) How do I calc the CGT based on above?

Your exempt periods are from (which month?) 1999 to June 2003 = say 4 years plus final 3 years upto June 2006 = 7 years.

Assuming you sell before June 2007, you would have owned the property for 8 years, of which 7 years are exempt.

Chargeable gain is say £90K x 1/8 = £18K
Less Taper Relief 25% or 30% = £5K Or £ 6K
Less CGT Annual Allowance say £9K

Depending on exact date of purchase and sale, there is very little or nil exposure to CGT.

4) can you suggest any way to avoid (i.e. legally) tax. i.e. sell quickly, transfer half into fathers name so we can both use allowance etc.

If you are or were letting the property since moving out, you would also qualify for ''letting relief'' which could exempt all your letting years upto a maximum letting relief of £40,000.

Appreciate your help.

I am sure you can fine tune the figures on the basis of exact month of buying the property and the likely date of selling it. All gains are spread evenly over the whole period of ownership.

Don't be panicked into selling on account of CGT. If you would rather let it, letting relief may allow you to do so.

Ramnik

[gunther1]

Ramnik,

Very much appreciate your advice. Thank you.

[gunther1]

I have just though of one other thing.

Do i need to formally produce a CGT computation in respect of this?

If so, when will i have to do this?
I am not currently required to conduct a tax return.

Thanks

[Tax Accountant]

I have just though of one other thing.

Do i need to formally produce a CGT computation in respect of this?

If so, when will i have to do this?
I am not currently required to conduct a tax return.

Thanks

If and when you sell the property.

Under self-assessment, you have to decide for yourself whether you have an obligation to notify a chargeable transaction.

Ramnik