A client and his sister have in the last year disposed of a property they owned jointly. This was gifted 50/50 to them in 1996 by their mother and prior to that was her PPR on and off since she purchased it in 1978. Since 1996 each of the brother and sister have lived in it - Sister 7 years (1996 - 2003), brother 5 years (2003-2008) and then rented out to 3rd parties for last four years. (2008-2012)
During the periods of occupation neither the brother nor sister paid any rent to the other.
No Base cost was ever established in 1996 (solicitor of the mother said not needed or something) but research of land registry/similar sales leads us to accept that £150k was the value at the time.
The disposal proceeds in 2012 were £500k so a large £350k gain has been made. £175k each.
My query is over the amount to claim for PPR and whether or not the periods when the property was not let nor available to be let as it was occupied by the joint owners affects the amount that will be taxable.
So, using the sister, I see her gain as being exempt for 10 of the 16 years (7 occupation plus last 3 as deemed) and she can then claim lettings relief (restricted to £40k) on the remainder of the gain. Therefore;
- 175k gain
- less PPR relief of £109k
- Gain before Lettings relief £66k
- Lettings relief £40k
- Taxable Gain £26k
- Tax due at 18% after annual allowance £2.8k
- (Brother similar but only 8/16ths exempt and as he is higher rate taxpayer tax due is £10.3k)
apart from the issue of ensuring 1996 base cost is "reasonable" anyone for see any glaring errors