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PPR ... calculation of capital gain and determination of facts re 2nd residence

PPR ... calculation of capital gain and...

April 2000 - Janet and Bob purchase a flat for £83,000. Bob moves in then. August 2000 - Janet and Bob marry. Janet moves into the flat.

April 2006 - flat is re-mortgaged - this time the mortgage and lease put in Janet's name alone. August 2006 - They leave the flat as Bob has a job in another town. Flat is put on the rental market, and a property rented in the new town. December 2006 - tenant is eventually found. Flat is let until sale in December 2011.

May 2007 - 2nd property - a house - purchased in new town.

August 2011, they move again, letting the house (2nd property) immediately, and putting the flat (1st property) on the market (having added Bob's name to the lease again). December 2011 - flat is sold for £150,000.

Janet and Bob did not make an election as to which is their principal private residence, and I'm now trying to sort out their SA returns.

Total gain is £67,000, being £150,000 less £83,000. This accumulated over 140 months (about £478/month). 

1) Administratively - should I try and establish what their principal private residence is/was with HMRC before submitting the SAs, or can I do it at the same time (via letter, or in the white space). The house is now their principal private residence, although they are renting away from home now while at university.

2) Until May 2007, when the 2nd property is purchased, I'm minded that the flat is the principal private residence. Thereafter, in the absence of an election within two years to keep the flat as PPR, the house would seem to be the obvious PPR.

3) Is there a CGT liability for either Janet or Bob, or are they both covered entirely by PPR relief and Lettings Relief? 

Grateful for your thoughts.

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By vicadm
27th Nov 2012 21:30

PPR and Lettings Relief calcs

PPR relief for (76+36)/140 = £53,600

Lettings relief for 28/140 = £13,400 - which is the lowest of that, the PPR relief, and £40,000.

 

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By mhtax
27th Nov 2012 21:56

Question of fact

Flat is PPR for them both for 112 of the 140 months of ownership, April 2000 to August 2009. The transfers of title happened after marriage so no consequences - joint liability - and they both actually lived there.

The first point an election for PPR would have been possible was when the first house was rented, not the purchase. At that point the flat ceased to be PPR but an additional 36 months of ownership also qualify for PPR.

In May 2007 the second purchase became PPR.but once they started to rent elsewhere they should have considered an election again. I don't think being at University will qualify for job related absence. This means that if you are out of the 2 years time limit the rented accomodation is the current PPR.

I am not sure that the sale of the flat technically needs to be declared as it is covered by PPR and annual exemptions without the lettings relief. I would recommend declaring the sale as it tidys up the rental income ceasing. I do not see the need to white note space anything other than the PPR calculation.

 

 

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Edit : didn't see your calcs when started typing

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