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Capital Gains Tax - 2006/07

Capital Gains Tax - 2006/07

My grey matter is taking over, CGT rules back in the day of taper and indexation relief have escaped me - can anyone help?

Property owned 50/50 between husband and wife

Bought June 1996 for £130,000 + legals (TBC)

Sold December 2006 for £450,000 - legals (TBC)

Used as FHL all the way through (75% of building), but also PPR for H&W (25% of building)

Can anyone point me in the right direction?  I'm assuming the 25% "home" qualifies for PPR (they owned no other properties at this time), is letting relief applicable?  I'm struggling to work out the taper relief as I simply can't remember how it works anymore (out of sight, out of mind, etc!)

I'd be very grateful if someone could post an answer :)



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18th Apr 2012 11:50

A good starting point

A good starting point 

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18th Apr 2012 13:57

Interaction of PPR and business taper

The gain exempted by PPR is not 25% but 75% of 25%.

Something to do with 25% was PPR but only 75% of the attributable gain qualifies for PPR.


Letting relief before all that tho.

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18th Apr 2012 14:25

2006/07 ?

Excuse me, but are we not out of time for filing this one?

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18th Apr 2012 15:51

Thanks all - to clarify.....

Managed to suss it out.....I think......

The reason for the 06/07 is was it was submitted late, very late, by the previous agent, and HMRC have issued an enquiry against the Return.

Just not 100% sure on the post from Mike though with the taper relief, and if letting relief does apply.


So far, I'm going:


Sale  450k

Sale costs 8k

Cost 130k

Indexation 8k (approx)

Gain 304k x 50% = 152k


Less PPR relief 25% = 38k (152 x 25%)

Less BATR 75% = 85.5k (152-38 x 75%)


Tapered gain .'. 28.5k (less annual exemption of 8.8k)


Is there anything I'm doing wrong there, or I have missed?


To clarify, the property is 8 holiday flats (representing 75% of the property), and the home on the ground floor (with a ground floor extension, representing 25% of the property)




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18th Apr 2012 16:32

The reason for the enquiry...

... may well be the decision in Jefferies, which is what I think Mike was probably alluding to.

You only get business asset taper relief on 75% of the gain after OMR (being the 75% of the property used for business purposes, despite the OMR apportionment already made) and the remaining 25% gets non-business taper relief.

In your situation though, I think you have an additional £38K of lettings relief between the basic OMR of £38K and applying taper relief.

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18th Apr 2012 17:07

Letting relief? Taper relief?
Even though the properties were (I believe) purchased as holiday flats with a basement annexe - I think with a separate entrance, etc - does letting relief apply. Reading the HMRC guidelines, it mentions letting out their own home; would the whole property count as their home then?

On the taper relief, am I looking at [(114 x 75% x 75%) + (114 x 25% x 30%) = £72,675 instead of the £85,500 (obviously subject to the query relating to letting relief above)?

Apologies for all the questions - it's totally gone from my memory, and it's almost like I'm having to learn it all again!

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18th Apr 2012 17:30


Your situation is different from Jefferies then!

Apologies, I'd assumed from the way you were doing the calculation that the "flats" weren't self contained and all were part of a larger whole.

If they're self-contained separate dwellings, then you're essentially selling eight separate properties, one of which qualifies for OMR.

You're right then that lettings relief won't apply to the gain on the other 7.

Those 7 will then qualify fully for BATR.

Why is the OMR element 25% rather than 1/9th though?  Should the proceeds not be apportioned based on values of the individual properties?

The Jefferies decision may still be the root of your enquiry, but HMRC too may not understand exactly what has been sold.

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19th Apr 2012 09:13

Sold as one

They have been sold as one "property".  I must admit I am not certain if you could individually sell one of the holiday flats whilst still retaining ownership of the other 7.


The property is split in to 5 floors - 4 floors x 2 flats, and the basement (with extension) accounting for the bottom floor.  25% has been used as this is a fair proportion of floor area in our opinion.


I'm trying to ascertain from the client exactly what the "make-up" of the properties were inside the building, but I'm guessing there is a stairwell up the middle of the property, with 8 flats coming off those on the 4 floors, and then either a separate entrance or a "PRIVATE" door on the ground floor for access to the OMR.  There are no communal areas, other than the corridors/stairwells to the best of my knowledge (i.e. no sharing of bathrooom or kitchen facilities).

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19th Apr 2012 12:15

Confirm your facts

From what you're saying, I think you can distinguish from the Jefferies decision, as you do seem to be dealing with 8 self-contained properties.

I imagine you could sell one of the flats if you sold a long lease, as you would need to with any flat in a block.

Once you've confirmed the position with your client, I'd be inclined to "strike" at the potential Jefferies argument by apportioning proceeds and costs between two gains (then subdivided between H+W); one for the main residence and one for the other 7 flats. That sets your case for any later arguments that might ensue.

You can then let HMRC bring the argument to you and keep your own powder dry.

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