CGT on let property disposal

CGT on let property disposal

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Client gifted a property to his son. Among stamp, IHT considerations is unsure of CGT treatment.

Client purchased a buy-to-let property (Property X) in 1989 for £100k. He lived in a second residence (Property Y) nearby.

In 1999, he disposed of his main residence (Property Y) and moved into the buy-to-let property (Property X)

Him and his wife and son resided at Property X between 1999 until 2008. In 2008, client's son purchased a new house  (Property Z). Client moved out and rented out property X.

Between 2008 - 2014 client split time between his country of origin (Trinidad) and son's new home. He is still considered UK tax resident. Property X was rented out.

In 2014, tenant moved out of Property X and client moved back into it for 3 months. After 3 months he felt he could no longer live there on his own (he is now 80 years old) and returned to live with son. He legally transferred ownership of Property X to his son. The value of the property is now £400k.

Questions:

1. Client is now 80 years old. Client made some improvements  to propety in 1999 (loft conversion, new kitchen, new extension and chimney breast removal). He has approximate figures but no receipts or paperwork. Would he be entitled to deduct these from his CGT calculation given the lack of support?

2. Total period of ownership is 25 years. Am i correct in thinking he can get PPR for 9 of these years (1999-2008), is there anything else he can claim (other than lettings relief and the last 18 months) ? (ie time when he was out of the country although this was due to retirement not employment overseas)

3. The return to property for 3 months in 2014, as this is his main residence at the time of gifting to his son and he has lived there for 3 months can he claim full CGT exemption for this or has he not lived there for long enough. He has not made any elections for main residence with HMRC.

Replies (3)

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By cohen
09th Apr 2015 18:47

Hi

In the absence of any elections, you will need to determine his main residences throughout the period of ownership based on the facts.

For the unreceipted expenses, I would include a claim for these, but make the client aware that they could be subject to HMRC query. You should also consider flagging these as estimated figures on the relevant tax return, depending on how close to an accurate figure you can get.

The 3 month period of occupation in 2014 will presumably already be covered by the final 18 months exemption already, so I can't see that this is a major issue.

There is an additional exemption for a period of absence up to 3 years, but that is dependant upon them not having another residence during that time, which presumably isn't the case here.

See http://www.legislation.gov.uk/ukpga/1992/12/section/223/enacted

There is no further mention of the wife, and I assume that the property was in the father's sole name?

 

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By duncanedwards
09th Apr 2015 19:13

My thoughts
1. With no actual numbers and no documentary evidence that the work even took place, it's a big ask to be able to make a robust case for a deduction.

3 Quality of residence is what matters so if all points to being his PPR for 3 months, it probably was.

2 Assuming 3 establishes PPR is there still the 3 years absence for any reason relief? Agree being overseas other than for employment doesn't help.

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By Jadejie
09th Apr 2015 19:29

Quality time and reason

As others mentioned, the quality of the residence is more important than quantity.  So the client went back to live in Property X permanently but only found it is impractical due to health reason. Thus he should still be able to claim PPR.

If you want to look up, there is a case law about a couple who only stayed in their house for a few days/weeks  before it was sold again. However, it was the reason was that his wife dislike the property and would not live it it. Thus PPR was allowed.

If the PPR can be established in the final month, he would be able to claim 3 years for any reason between the last time he stayed in property X as his main home till sales. (i.e 2008-2014)

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