Scenario:
Client buys property in Jan 1968 for £100 (!!!) lives in it until Jan 1975 from when it is rented out until sold in Nov 2006 for £70,000.
March 1982 value £12,000 (no formal valuation undertaken but some research done in historic local papers to find out how much similar properties were woth then.)
My calculation;
Disposal £70,000
Less Rebased value £12,000
Indexation (£12,000 x 1.047) £12,564 £24,564
------------
£45,436
Less Exempt (PPR - final 36 mths)
£45,436 x 36/296 mths £5,526
------------
£39,910
Less lettings Relief (S223(4) TCGA)
lesser of £5526, £39,910 & £40,000 £5,526
-------------
£34,384
Less Taper Relief (35%) £12,034
------------
£22,350
From what I can see, I have to use the rebased value (per the 'kink test') because it seems I am compelled to compare the gains before any PPR etc reliefs and adopt the calculation that provideds the lowest gain but if the actual cost was used and the private residence period pre 1982 taken into account this by my reckoning would give a lower gain after PPR and Lettings relief i.e
Disposal £70,000
Cost £100
Indexation (As Above) £12,564 £12,664
---------------
£57,336
Less Exempt (PPR)
£57,336 x 120(84 resicence +final 36)/
total ownership 467mths £14,733
----------------
£42,603
Less Lettings Relief. ( Lesser of
£14,733, £42,603 & £40,000 ) £14,733
----------------
£27,870
Less Taper Relief (35% ) £9,754
----------------
£18,116
Is there any way that the second calculation can be used or must I use the rebased value at March 1982.
Many thanks for anyone who spends the time trawing through this and I would be very grateful for any responses.
Ian Riley
Replies (3)
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Are you sure .....
..........that you get the 84 months of actual residence? s223(7) says that "period of ownership" does not include any period before 31 March 1982.