HMRC requirement for Nil Capital Gains on sale of second property

HMRC requirement for Nil Capital Gains on sale...

Didn't find your answer?

Hi all,

I sold a second property last year and am a bit confused about what to do with regards to capital gains tax.

I have worked out there is Nil gain so do I still need to do anything with regards to informing HMRC? 

Also the original purchase price is not recorded anywhere.  I have checked with land registry and the value of the purchase was not included on any documents with them at the time (It was in the mid 80's)  Will I be asked to provide evidence of the original purchase price?  If so how can I?  I doubt banks would keep records this far back?  

If anything I have made a loss when the improvements I made to the property are taken into account. Again these were done many years ago (early nineties) I have not got any evidence like receipts. I used to receive rent which I declared through self assesment, so can I offset the loss against this income? I'm not too bothered if I can't.

Thanks in advance

Replies (12)

Please login or register to join the discussion.

avatar
By pauld
07th May 2014 15:52

No need to declare

If you are not within self assessment and there is no gain arising then you do not need to declare anything or inform HMRC.

Based on the increase in property prices in the late nineties and noughties, it is surprising there is no gain as property purchased early eighties and improvements carried out early nineties. Have you given it away to create a loss? Loss can only be carried forward to set off future gains.

 

Thanks (0)
avatar
By taxhound
07th May 2014 16:25

You may need to report the transaction

If the transaction is over the reporting threshold, you may need to report it even if there is no taxable gain:

If you normally complete a Self Assessment tax return

You'll need to complete the tax return Capital Gains Tax page if either of the following apply:

your chargeable gains - before deducting any losses - are more than the Annual Exempt Amount - £10,900 in 2013-14the total amount you received from selling or disposing of assets is more than £43,600 in 2013-14

You'll receive a letter each year from HMRC, usually in April, telling you to complete your tax return online or on paper. If you don't receive a letter you should get in touch with HMRC.

http://www.hmrc.gov.uk/cgt/intro/report-gain.htm

 

If you do not usually complete a tax return, I would ring HMRC and tell them about the gain, or write to them including caluclations and hopefully they will be satisfied that you do not need to file a return.

If you made a loss, this can be carried forward and set against future capital gains.  It cannot be carried back and set against rental income. You will need to claim this loss on your self assessment return.

Thanks (0)
avatar
By pawncob
07th May 2014 16:11

Consider

How have you calculated the gain if you don't know the base cost?

 

If there isn't a gain, is there an allowable loss?

 

Gain can be calculated from an estimate of the purchase price (professional valuation is recommended) if no actual figure available.

 

Yes you do have to make a return, either to report the gain or to make a claim for the loss.

Thanks (0)
avatar
By michaelblake
07th May 2014 16:23

Not quite correct

 

The HMRC guidance at 

http://hmrc.gov.uk/cgt/intro/report-gain.htm

notes that if you do not normally complete a tax return you do not need to notify HMRC of the sale but if you do normally complete a tax return you should notify them if the sale proceeds were more than £43,600, even if the sale resulted in no gain.

 

 

 

 

Thanks (0)
avatar
By nogammonsinanundoubledgame
07th May 2014 16:26

If I may place my head between the lion's jaws ...
... I beg to differ with some of the above analyses, although the resulting recommendations may be sensible or practical.

The test that taxhound mentions determines whether there is a requirement to add Capital Gains pages to an existing obligation to file a tax return. If the gain exceeds the annual exemption then there would be an obligation both to file a tax return and complete the CGT pages.
However if the gain falls below the annual exemption but the proceeds are more then four times the annual exemption, there is no obligation to register for self assessment (unless of course there are other grounds for that requirement). If already obligated to complete an SA return, THEN there would under those circumstances be an obligation to include CGT pages.

All that said, it may be practical and sensible to approach HMRC to disclose the matter (whether they ask for a tax return would then be up to them), if for no other reason than that their computer system is now highly efficient at identifying transactions in land, especially where reported to the Land Registry. HMRC may NOT have sufficient information, without your co-operation, to verify that there is no net taxable gain. If you remain silent on the matter they may have concerns that a liability is being evaded.

Do take care that some of the "improvement" expenses have not already been claimed as "repairs" expenses throughout the period of letting.

With kind regards

Clint Westwood

Thanks (1)
avatar
By Gurinder Kular
07th May 2014 16:38

Sadly no gain

I really wished there was a gain, but the property was originally a take-away business in a thriving area in the midlands.  However for the past five years it resembles most high streets outside the south east. Loads of boarded up shops.  The tennant also ripped the shop of its fixtures and fitting and left the property in a totally dilapidated condition. Also didn't pay any rent in the last year!

 

I haven't received anything from HMRC and no I don't complete a tax return normally.

Thanks (0)
avatar
By Gurinder Kular
07th May 2014 16:51

Original Purchase price

I know what I paid for the property , would I still need to get a professional valuation? 

Thanks (0)
Replying to david.bransbury:
Stepurhan
By stepurhan
07th May 2014 17:33

Only if queried

Gurinder Kular wrote:
I know what I paid for the property , would I still need to get a professional valuation?
If you are confident that you know what you paid for the property, and it creates a loss then that is enough for now. If there has been a loss then, as you are not doing a return already, there is no requirement to report anything. As Clint Westwood has said, advising HMRC you have sold the property at a loss could forestall them enquiring into the sale. They have got very hot on this in recent years.

Your problem comes if HMRC perform any sort of check on the figures. They will want proof that your recollection of the price paid is accurate, or at least close enough to not make a difference to the tax position. A professional valuer may be able to provide such proof, and it may be worth enquiring now. I cannot help thinking that few, if any, valuers will give a 30 year old valuation. They may have access to historical data on prices generally that will help though.

Thanks (1)
Replying to SamPayne:
avatar
By Vaughan Blake1
09th May 2014 09:07

What about March 1982 values?

stepurhan wrote:

I cannot help thinking that few, if any, valuers will give a 30 year old valuation. They may have access to historical data on prices generally that will help though.

Most valuers are geared up for March 1982 values so one for middle eighties shouldn't be too much of a problem.

Thanks (0)
avatar
By Vaughan Blake1
07th May 2014 17:13

Print the Zoopla page

This can be useful proof of the purchase price if needed.  Don't forget the solicitor's fee, stamp duty and any other purchase costs on top though! Edit Sorry I just re-read the OP and Zoopla doesn't go back as far as the mid 80s.

This case highlights the danger if you bin everything after 6 years!

Have you put in a claim for capital allowances on the fixtures & fittings?  If not this could give you some relief for income tax as it is clearly a commercial let. 

Thanks (1)
avatar
By bernard michael
08th May 2014 09:20

If you ask the solicitor who arranged the purchase he should still have a copy of the completion invoice which will show all the relevant details including purchase price. He may charge you for searching his archives that far back

Thanks (0)
By JCresswellTax
08th May 2014 09:22

One thing

Is if you would like the loss to be available to use against future gains, you must notify it to HMRC.

Thanks (0)