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Capital Gains Tax computation

Capital Gains Tax computation

The asset is mixed use ie business asset and non business asset.

Property aquired November 2002 for £55
spent £25 renovations
Furnished holiday lettings July 03 - Oct 04
Ordinary letting Oct 04 - June 05
Furnished holiday lettings June 05 to date.
Disposal probably November 07 for £135.

I am not sure how to split taper between business and non business ie holiday lets and non holiday lets.

Client clearly has had it as holiday for longer than two years so presume only 25% chargeable.

Am I wrong here?

Thank you to anyone who could help
Jason Brown

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By Anonymous
26th Sep 2007 15:48

Another method............
I think you could look to see if the property meets the criteria as a FHL for each tax year in turn. For example, for the period July 03 to April 04 if it meets the qualifying criteria then it is a business asset for the full tax year i.e 6 April 03 to 5 April 04. if it does not meet the criteria, then it is a non business asset for the full tax year. The same applies to 2004/05, 2005/06, 2006/07 and 2007/08.

You then apportion the gain between business and non business over the number of months held and apply the appropriate % of taper relief, as advised below

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By Anonymous
26th Sep 2007 12:18

Split Gain
Apportion gain on time basis into business/non-business

Apply appropriate taper % to each notional gain based on say 5 years ownership

Should be 75% business taper and 15% on non-taper

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26th Sep 2007 12:29

split the total ownership period between business periods and no
The gain before taper is £55K, ie £135 - £55 - £25.

The total period of ownership is 60 months and of that time, it has qualified as a business asset for about 45 months (Jul 03 - Oct 04 and June 05 - Nov 07)
The rest will be a period where the property was a non business asset.

Then its simply a matter of apportioning the gain between bus and non-bus periods and applying the appropriate rates of taper for the full period of ownership:

Bus Asset £55K x 45/60 = £41250 x 75% (> 2 years) = 30938
Non-bus Asset £55K x 15/60 = £13750 x 15% (5 full years) = 2063

Total taper relief £33001

Watch actual apportionment as of course I've just looked at this very roughly. Also the final period to sale, will this all qualify as a business? Will the holiday letting really continue right up to sale

Finally, I have assumed that the property has been owned for 5 complete tax years, i.e. that the sale will take place later in Nov 07 than the purchase took place in Nov 02.

Hope this helps

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